Last year, the sector saw 652 mergers and acquisitions deals – so, with 630 so far, and with the fourth quarter traditionally the busiest period, it looks as though 2013 will be a record year.
Publicis has chalked up seven deals, making it one of the quarter’s most active buyers and demonstrating that its "merger of equals" with Omnicom has done little to slow down its own acquisitions programme. So far, at least.
Between them, social media and PR command much of this quarter’s M&A activity, countering any view that social is heading for a slowdown. Indeed, social is increasingly tied to the PR agency offer and therefore a key driver behind many of the deals we’re seeing in the PR sector.
It’s also clear that management consultants are growing their influence in the sector, with big names such as Deloitte continuing to acquire this quarter and more deals likely in the year ahead.
Of real interest, though, is that, in this quarter, we see Asia-Pacific overtaking the UK in terms of deal volumes for the first time. And, behind the figures, there is a really interesting cultural story to tell. In Europe and the US, the point of setting up a business is generally to sell it at a certain point. However, in Asia – and particularly in southern Asia – selling a business has until recently been perceived as a sign of failure, with the person in charge seen as ceasing to be an entrepreneur.
In Asia, selling a business is now seen as a valid business strategy, not something to be ashamed of
It might have taken a while but that mindset is finally changing. Owners who might never have thought about selling their business can now see it as a chance to participate in a broader commercial opportunity and perhaps be more "Western" in their thinking. Selling a business is now seen as a valid business strategy, not something to be ashamed of.
So it’s looking like a bumper year but, compared with the market peak in 2007, the way people are buying is significantly different. Back in 2007, a deal could go from start to finish in six months. Now, there’s little of that froth and the process is rigorous and strategic, with most deals taking around nine to 12 months.
Even against this backdrop, a vast number are being completed. The market looks buoyant, valuations are strong and people aren’t getting carried away – they’re more deliberate and thoughtful in their approach.
Looking to 2014, there are some emerging buyers of note, particularly in Asia, who are offering clients something different to the bigger groups. Their ambitions have been galvanised by the Aegis/Dentsu and Publicis/Omnicom deals, and it will be interesting to watch them as they build global hub businesses: smart 21st-century groups that are designed to cope with modern marketing needs.
We can’t necessarily see these plans showing up in the data yet because of the time required to complete transactions but, trust us, this will be a big theme in the years ahead.
Jim Houghton is a partner at Results International