Bird & Bird was delighted to host Ciesco at its offices in London for its annual Digital, Media, Marketing and Related Technology M&A Review. The event saw an overview of the M&A landscape for the last 12 months, as well as some predictions for the future. We present some of the key takeaways from the M&A landscape in 2019 below, as well as looking at some of the key trends in the sector more broadly.
Demand for data analytics and digital transformation capabilities a driving force
2019 saw an 11% increase in large deals (those valued over $1bn) compared to 2018, with the increased need for digital transformation and data analytics capabilities seen as a driving force. The top deal by value was Salesforce's $15.7bn acquisition the Seattle-based data visualisation company Tableau Software, an acquisition designed to improve customers' ability to make data-driven decisions. The deal was another example of how large marketing clouds are positioning themselves as "one stop shops" for brands.
Private equity involved in over 40% of deal transactions
2019 witnessed a staggering increase in private equity involvement in the media and technology sectors. Ciesco's analysis suggests that 42% of deal transaction involved a PE buyer, an 80% increase on 2018. Digital media and martech were the most popular sub-sectors. The increased use of technology across the sector is seen as a major reason for the increased involvement of PE firms, encouraging as it does positive outcomes including recurring revenue and regular cash flows.
The consultancies continue to be active in the space
The big consultancy firms demonstrated their continued interest in the marcomms space with a number of important strategic acquisitions. Accenture acquired 16 media, marketing and technology related companies in 2019, making it the most acquisitive consultancy firm. Notable among these was its purchase of Droga5, an innovative creative agency, which follows a number of similar acquisitions by the consultancy. The activity in this space shows the consultancies continued focus on providing integrated solutions for CMOs and marketers.
Holding companies continue to focus on areas outside of M&A
The total percentage of deals completed by the holding companies was down to just 2%, which is reflective of a year that has seen turbulent share prices and [poor] financial performance. Only three of the big six agencies featured in the list of the top 10 active buyers for the year, with Dentsu being the most active in this space. This demonstrates the companies' focus on evaluating and future-proofing their service offering, rather than engaging in significant M&A activity.
The results of the M&A review show the continued importance of data analysis to the sector. Industry players will be under pressure to ensure that the data that they collect will be utilised in the most effective and creative way. Agencies or technology companies able to offer creative data analysis tools are likely to be closely monitored in the coming years.
Across the media space, customers are increasingly demanding great service and experience, as demonstrated in the increased presence of high-quality long-form streaming content. Brands and agencies able to respond to these needs, marrying such content with high-quality data capture and analysis, will be best placed to attract budget dollars. Brands may therefore seek to acquire agencies that are able to deliver such services.
A brand's values have never been as important as they are now, with increased scrutiny on how they are able to delivery purposeful opportunities and environmental sustainability. Brands have an opportunity to step in and lead in a number of these areas, unconstrained by political or other concerns. Agencies are able to help with delivering the message around building sustainable businesses, but the real challenge comes in ensuring that there is delivery to back it up.