In a rough 2020, incumbents and upstarts took divergent M&A paths

In a year where the advertising and marketing industry (like all industries) was hammered by the Covid-19 pandemic, chief executives preferred to be circumspect with their finances, prioritising abundant caution over aggressive spending to preserve cash. As large agency networks slashed jobs, froze or reduced salaries and rushed to keep their shops open and above water, they focused more on driving internal efficiency and scale by merging existing operations rather than adventurously—and expensively—acquiring new businesses.

This was perhaps best highlighted by the moves of WPP, which sought economies of scale and expertise with two different decisions. In November, the network shocked the community by merging the century-old creative shop Grey with the much younger AKQA.

Exploring new frontiers: black symbolises AKQA and red is for Grey.

Then, the company sought to meld the commerce expertise of Geometry into VMLY&R, and integrated the operations of Glitch too. In Australia and New Zealand, it moved to take full control of its stuttering regional operations.

Other agency networks too sought to rightsize their operations in a pandemic. Battered by frozen or slashed ad spend and a weighty network, Dentsu in Japan announced that it would slash the number of brands under its international unit from 160 to six, as it cut thousands of jobs. Already, the firm had begun consolidating its business in the UK, even as it expanded into the B2B market by merging five agencies.

In other news, Omnicom merged TBWA and F/Digital in Vietnam, while Publicis-owned creative shop BBH consolidated in India and China. 

This caution was visible in early reports from boutique advisors on M&A activities in the market. According to an estimate from Ciesco, an M&A tracker based in London, activity in the first three quarters of 2020 was down 17%, as companies held onto their cash in a tough market. More recently, transactions were down 25% year-on-year, the firm said. Despite the 25% reduction in year-to-date activity, private equity firms showed resilience, with 38% of all transactions involving a PE buyer. 

The overall disclosed value of deals decreased by 55% on 2019, Ciesco stated. Accenture remained the most active buyer in the technology, digital, media and marketing sector, with 12 acquisitions announced to date. It is followed by Dentsu, Embracer Group, Providence Equity Partners and Tencent Holdings, completing six acquisitions each. Digital Media and Traditional Media remained the most active target sectors, with 213 and 173 deals, respectively. 

In contrast to the networks consolidating in 2020 during the pandemic, Sir Martin Sorrell’s S4 Capital used the opportunity to expand its reach globally. In June, its MightyHive absorbed Australian unit Lens10 and it previously acquired Latin American agency Circus Marketing in January.

Sir Martin Sorrell

Accenture Interactive, another serious challenger to the old ad networks, also made further inroads into the market. In August, it acquired Creative Drive and in May it acquired Byte Prophecy in India, focused on bolstering its analytics capabilities. 

As marketing budgets were slashed and frozen, brands needed to find new ways to reach consumers and latched onto a growing number of influencer agencies and their lists of key opinion leaders (KOLs) to maximise limited means. One firm that benefited in 2020 in APAC was Anymind, which made two deals to cement its position near the top of this market. In January it bought Japanese influencer network Grove and in March bought Pokkt in India.

L-R: Grove CEO Junki Kitajima, Kosuke Sogo of AnyMind.

Elsewhere, Impact acquired influencer-management platform Activate and claimed it had pieced together the world’s largest marketplace.

M&A trends also helped spot divergent trends in the same space. Two deals signified the rapidly changing currents of the advertising and media market. At one end, Spotify made a $235 million acquisition of Megaphone as it sought to strengthen its burgeoning podcast business. On the other end Napster, widely regarded as a music pioneer, was sold for just $70 million.