A surge of merger and acquisition activity in the marketing services
sector was predicted for the coming year in an extensive report
published this week.
But agencies were warned against rushing into selling in the hope of
cashing in on the improving economic climate. With would-be sellers
still outnumbering potential buyers, only the most desirable targets
will attract high prices, the report says.
Published by WKS Results, a joint venture between the accountancy firm,
Willott Kingston Smith, and the management consultant, Results Business
Consultancy, the report is based on replies to 800 questionnaires sent
to heads of agencies, PR companies and other marketing services
operations during October.
It reveals that 89 per cent of company chiefs predict more mergers and
acquisitions in the coming year. But the report indicates that agencies
are keener to sell than buy.
Bob Willott, a director of WKS Results, said: ‘Nothing indicates the
current level of interest in mergers and acquisitions more clearly than
the fact that 74 per cent of respondents had been involved in activity
of some sort and that 9 per cent had completed an acquisition.’
The report suggests much of the activity is being fuelled by uncertainty
within middle-ranking agencies, which have failed to emulate the success
of original ‘new wave’ shops such as Abbott Mead Vickers BBDO and BMP
‘Some of these agencies will be looking for a new home to boost volume
or to provide for the eventual retirement of the more senior people,’
the report says.
Most vulnerable will be conventional agencies servicing business-to-
business or financial clients, which are facing intensified competition
from direct marketing rivals broadening their offerings, the report
predicts, noting: ‘Agencies that are merely treading water will not
attract premium prices.’
The most likely buyers will be international networks and the strongest
UK publicly quoted agencies, which are looking for targets that will
plug a strategic gap and enhance long-term earning.