UK most attractive M&A market for agency buyers

Despite Brexit, 82% of acquirers shop for agencies in UK 'innovation hub'.

Boris Johnson: pledged a growth in business links between UK and rest of world
Boris Johnson: pledged a growth in business links between UK and rest of world

Despite nearly four years of economic uncertainty caused by Brexit, the UK is the most popular market for agency buyers, with 82% of acquirers looking to shop here. The next most popular markets are the US West Coast (63%), South-East Asia (63%), US East Coast (56%) and Germany (44%).

The second annual SI Partners Global Acquirer Report, which maps the buyer landscape in media and marketing industries, shows a "considerable amount of demand in the market" despite geopolitical disruption.

The UK is regarded as an "innovation hub" with buyers drawn to its "entrepreneurial talent, international outlook, low regulation and benign tax environment". Germany is seen as "a large and relatively untapped market", says the report, which surveyed 300 senior decision-makers across Europe, the US and Asia Pacific involved in acquiring creative, media and technology businesses.

Almost three-quarters (72%) of the businesses looking to acquire plan to make one or two purchases in the next 18-24 months, with 24% reporting they are targeting three to five purchases in this period.

The top reason for buying is gaining access to skills and talent (70%), followed by gaining access to emerging technologies (66%). The priority criteria acquirers are looking for are growth (90%), profit (57%) and client spread (40%).

However, for agencies looking to sell, it’s notable that the buyers surveyed place little emphasis on fame and reputation (3%), despite entrepreneurs prizing awards as a sign of success and premium valuation.  

Differing priorities

Technology consulting companies, traditionally reluctant to purchase marketing skills, are warming up to the idea, with 36% of these companies planning three to five deals in the next two years (compared with 24% of all companies). Some 84% of tech consulting companies are looking to invest in the UK. 

The report predicts more interest in hybrid agencies that can incorporate CRM and performance marketing with creative skills.

"In the past, many technology companies did not value the work of creative agencies as highly as their technology projects, but this is changing," Tristan Rice, partner at SI Partners, said. This change comes as they become attracted to the revenue potential of owning the expertise that creates and designs the whole process of the customer journey, he explained.

Within global marketing services groups, 29% have plans for three to five deals over the next two years. "Many are looking for acquisitions as part of a strategy to reinvent themselves," added Joe Hine, partner at SI Partners.

For this kind of buyer, capabilities on the shopping list are adtech/martech/media tech (86%), content (76%) and performance marketing (76%). The UK remains a key target for this group, with 88% seeking to acquire in this market. Although the impact of Brexit is still uncertain, the fall in the value of sterling against the dollar may make UK assets attractive to US groups, the report said.

Almost 80% of independent marketing services companies plan to acquire one or two businesses over the next two years, with 82% prioritising the UK as the location for their search. Likely to be more risk averse, this group of buyers is more interested in a cultural fit (56%) and a good spread of clients (59%).

Performance marketing expertise is a top-three capability for 62% of the independents, suggesting they, like their global counterparts, see this as a vital way to attract and retain new clients. Unsurprisingly, the majority also see content as a crucial capability (56%).   

Private equity firms consider emerging tech (70%) and sector/client specialisms (65%) to be priority capabilities. They are on the hunt for companies with high-growth potential that can blend creativity and technology, according to the report, with 76% of PE investors particularly interested in the UK.

Become a member of Campaign

Get the very latest news and insight from Campaign with unrestricted access to campaignlive.co.uk , plus get exclusive discounts to Campaign events

Become a member

Looking for a new job?

Get the latest creative jobs in advertising, media, marketing and digital delivered directly to your inbox each day.

Create an alert now

Partner content