Brainlabs sells minority stake to private equity to fuel M&A ambitions

'We want to build the biggest advertising agency in the world,' chief executive Gilbert says.

Brainlabs' founder Daniel Gilbert
Brainlabs' founder Daniel Gilbert

Brainlabs’ founder Daniel Gilbert has sold a minority stake in his performance marketing agency to private equity firm Livingbridge as he seeks "to build the biggest advertising agency in the world".

Terms of the deal were not disclosed but Campaign estimates the agency, which Gilbert founded in 2012 when he quit Google, could be worth upwards of £50m.

Brainlabs has emerged as one of the hottest digitial agencies in London as it has won clients such as Which?, TUI and Formula 1 and helped Vodafone on a project basis to bring digital media-buying in-house last year.

North London-born Gilbert, 33, said he only wanted to sell a minority stake to an investor, rather than become part of a big agency group, because he sees so much growth potential for Brainlabs and he wants to use Livingbridge’s investment to fund acquisitions.

Gilbert, who is the chief executive, told Campaign: "The growth trajectory in the business and the outlook is so strong that we want to continue growing the business as it is.

"There’s a sense in the business that while we have plenty of options down the traditional [agency] group-type arrangement, on a 10-year view we could overtake them, so it didn’t make much sense [to sell to a holding company].

"We want to build the biggest advertising agency in the world. That’s not going to happen in the next five years but on a 30-year view, people underestimate what they might be able to achieve."

Asked if he meant overtaking the likes of WPP, which has an £11bn stock market value, he agreed, although "we might meet in the middle somewhere".

He said: "Our plan for the next five years is to build the biggest and best marketing agency in the UK. On a 30-year view it’s going to be the best marketing agency in the world."

Gilbert said he had "the utmost respect" for established agency groups but "the world is changing pretty fast". He added: "We’re part of the new world and building this new type of agency model.

"There’s so much excitement and so much fun in the business at the moment that we didn’t want the journey to end. It feels like the beginning, rather than the end of the road."

The advertising industry is going through the biggest disruption in a generation, which is "creating opportunities and space in the market for new types of approach and new players", particularly with the advent of "automation-assisted, technology-led, data-driven" marketing, he said.

Reuniting media and creative

Gilbert believes the media and creative disciplines, which separated in the 1980s and 1990s, are reuniting because advertisers need dynamic creative that is personalised and optimised at speed and scale in the digital age.

"We’re going to reunite creative and media with a full-service marketing agency built first and foremost around clients who want true partnerships, specialist expertise and market-leading growth," he said.

Brainlabs’ most recent accounts show it made an operating profit of nearly £2m in the year to March 2018 and Gilbert said it has been growing at close to a "triple-digit" rate.

On the basis that Brainlabs is now making £4m a year in profit, and on a hypothetical multiple of 12 times annual earnings, the agency could be worth in the region of £50m.

Gilbert and Livingbridge would not comment on any estimates.

He said revenue growth is likely to ease to around 60-70% in the year ahead and acquisitions would help Brainlabs to "get back to 100% year-on-year growth".

He will look primarily at UK-based acquisitions with an eye on an international footprint in the next "phase" of the business.

Livingbridge said it will help Brainlabs with its "acquisitive growth strategy, building a pipeline of merger targets with expertise in SEO, content, production, data, and email to complement its performance marketing capability". 

Matt Upton at Livingbridge said: "Brainlabs is a remarkable agency and an example of a robust British business that has grown from the strong UK business eco-system, with an exciting future ahead. 

"Given the market background, it is businesses like this that will establish the UK as a leader in innovative industries. We are delighted to be working with the team as they look to grow market share, both organically and through M&A."

Livingbridge has a reputation as a relatively low-profile investor with a large portfolio of investments, which have included market research firm MORI and fashion brand Fat Face.

Gilbert said: "Having met most mid-market private-equity firms it was clear to me that Livingbridge stood apart in their understanding of our sector, their ambitions for our business, and their track record of success as a firm."

Brainlabs was advised by JEGI Clarity, the corporate advisory firm that also advised Adam&Eve on its sale to Omnicom’s DDB and MediaMonks on its sale to Sir Martin Sorrell’s S4 Capital.

Livingbridge was advised by Results International.



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