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frenzy
Tom DenfordSep 26, 20123 min read

Are We Entering A Digital Acquisition Frenzy?

 

Let’s start with a massive congratulation to the likes of AKQA, LBi and Fortune Cookie (plus I’m sure numerous others) who having led the digital revolution over the past decade have now had the even bigger boys knocking at their door.

In just the past couple of months over $1bn in acquisition deals have been on the table from large networks looking to claim stakes in some of the largest independent digital shops!

No one could deny the attractiveness of the likes of the above to the big advertising networks. With countless awards between them, a stellar list of clients and premium talent the only question perhaps, is why it’s taken so long for them to be snapped up, which is most likely down to the patience and determination for growth within the digital industry. But once the dust has settled what impact will these deals have on client business and will they continue to sound like a sound investment for all parties?

At a time when clients are looking to trim their agency rosters, especially within the digital space (I should know I used to operate a roster of 115 digital agencies) it would seem to make sense to bring more and more services under the same group umbrella. But, as I suspect, many of the larger digital shops will continue to operate as separate entities, with their own client pool.

What impact can clients expect?

So will clients benefit from consolidation? Certainly it may make it easier for clients to access different services within the same network but unless the acquisition results in the absorption of the agency into another existing entity (Fortune Cookie into Possibility Worldwide) then the client still faces the same agency, just with a new owner.

Therefore, who wins? Financial packages to one side, the agencies stand to benefit from greater access to a larger pool of clients, across more geographical territories. Investment enables growth in all areas at scale. Global clients may well see big benefits that come through an investment injection and the ability for the digital partner to scale according to clients global requirements.

But can the agencies retain the top talent and what happens to the corporate culture that the made the agency great in the first place?

It would be remiss to take a broad sweep as no two deals are the same but history has shown time and time again that culture can be eroded and top talent can start to seep. Clearly this can have an impact on clients business, especially if some of the super stars start to leave, to be replaced with other super stars who just don’t have quite the same affinity with the clients business. The culture within a larger digital shop is more likely to remain intact but it’s smaller entities that tend to see the greatest cultural change as the new owner starts to share it’s best practice and knowledge.

The watch out for client procurement teams is perhaps less about a change in rates but rather a need for changes to contracts and terms. At best this can be a mild irritant…

Be mindful of what the future might hold

Our advice to CMOs and client procurement leads is to keep a close eye on what develops once the ink is dry and the dust has settled. Look for signs of unrest and address early. Don’t wait until half the team has vacated before raising the alarm, unless of course you’re hoping to move your business to the new home of your old super stars.

The benefits to the networks are fairly clear. Buying up the big players only serves to strengthen their overall global proposition and attractiveness to clients. Buying expertise, talent, clients, platforms and innovative thinking is a smart move. Only last year at the e-G8 summit, Maurice Levy Chairman and CEO of France’s Publicis Groupe commented that ‘digital is the name of the game of tomorrow’.

Buying LBi for £333m (subject to regulatory approval) comes as no great surprise.

Who’s next? That would be telling but I have my suspicions.

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Tom Denford

Tom Denford is one of the world’s most trusted advisors to senior marketing and procurement leaders on navigating media and digital transformation. With 20 years’ experience in the marketing industry, which covers senior global roles in creative and media agencies, Tom co-founded ID Comms in 2009, with ambition for the company to be the world experts in maximising media value and performance.

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