While the recession has driven down the number of agency acquisitions over the past year, the rate of firms buyouts, or holding companies adding agencies to their rosters, is set to increase in the next six months to one year, say industry experts.
Industry leaders are bullish about near-future M&A activity because prospective buyers have regained a sense of confidence about the future of the economy, says Tim Dyson, CEO of holding company Next Fifteen, which recently acquired New York-based agency M Booth and Associates.
“I think there was a period last year where everybody stopped in their tracks and said, ‘Should we sell or should we buy?' That was a pretty common question at the end of last year,” he says. “I think in the next six months to one year, you will see a relative flurry of acquisitions, and many of them are those that would have been in the past six to 12 months but simply stalled because everyone was waiting for the market to become easier to read,” Dyson explains.
Rick Gould, managing partner at StevensGouldPincus, a merger and management consultancy for PR agencies, said that he agreed “100%” with Dyson's prediction, adding that Next Fifteen's acquisition of M Booth is an indication of a more active industry M&A market.
“That's an indication that it is coming back, and that buyers are going to spend for the better firms,” he said.
Gould explains that agencies are planning acquisitions more strategically than in the past, looking to increase their capabilities in certain regions or practices. They're also less often using acquisitions as only a means to increase net revenue, he adds.
“They're all strategic acquisitions, they're all niche” he says. “Social media is really hot right now, and some agencies want to expand services where they see they need social media, and that is a strategic acquisition.”
While agency executives agree that M&A activity has slowed noticeably in the past year, it had not stopped completely. Aside from Next Fifteen's purchase of M Booth, this month also saw Lambert, Edwards & Associates acquire fellow Michigan agency John Bailey & Associates. In the past three months, Ketchum and Germany-based Pleon merged, and Kreab Gavin Anderson, Sage Communications, and Beckerman PR made acquisitions. In the past year, Fleishman-Hillard, FD, CRT/Tanaka, HL Group, WeissComm Group, Middleberg Communications, and rbb Public Relations have also made acquisitions. Executives at a number of these firms told PRWeek during the course of reporting this story that they are actively seeking more deals. Meanwhile, Olivier Fleurot, CEO of Publicis' PR and event management companies, told Brand Republic last month that acquisitions are a priority for his holding company.
Sources at these firms also say that smaller agencies are feeling increased pressure during the recession and are increasingly putting the word out to larger firms, either by themselves or through a third party, that they're interested in being acquired. Mark Raper, CEO and chairman of CRT/Tanaka, said that “you can see that the slowdown seems to have impacted the smaller guys to a greater degree.”
Christine Barney, CEO and managing partner of rbb Public Relations, added that her firm has made its interest in acquiring other agencies publicly known. Since then, she said multiple agencies have approached rbb about the opportunity.
Other agencies are taking various approaches to buying other firms. Don Middleberg, CEO of Middleberg Communications, said that he's interested in adding to his firm's capacity in consumer, technology, and financial services. Jeff Lambert, president and CEO of Lambert, Edwards & Associates, said that his company's buy of John Bailey & Associates helped to expand its geographic reach throughout the Midwest, while also strengthening its position in the public affairs and automotive sectors. Meanwhile, Larry Rosenfeld, CEO of Sage, said that acquiring a firm that specializes in interactive and social networking could be an upcoming move for his agency.