Mar Tech and Data Dominated M&A in 2018 as Traditional Agency Acquisitions Slowed
Adobe was the top global spender, according to R3 report
Consulting firm R3’s mergers and acquisitions report for 2018 shows a rise in mar-tech and data buys and a decrease in those targeting agencies. The report’s 15 “big spenders” last year were also less traditional, with “mar-tech companies and unconventional buyers,” such as Adobe and Alibaba, leading the total 465 deals worldwide.
R3 still classified ad holding companies as active in M&A last year, but they focused more on the consolidation and reorganization of existing assets. The report does offer suggestions for future purchases.
“M&A activity in 2018 signaled that the grand view of mar tech is becoming actualized and 2019 will be about how companies move beyond facilitating the intersection of marketing technology and management to real integration into the enterprise,” Greg Paull, principal and co-founder of R3, wrote in the report.
R3 saw a 144 percent increase in global M&A ad industry spending, which reached $33 billion in 2018. But only 20 percent of transactions completed last year involved holding companies. Adobe was the top global spender, followed by Alibaba and IPG—the only holding company to break the top five for 2018 both worldwide and in North American spending totals.
IPG earned the third-place ranking largely due to its $2.3 billion July acquisitionof database marketing company Acxiom as well as those of Brazilian digital agency Cappuccino, London-based social media firm That Lot, ARC Public Relations and Hurrah Productions. Adobe ranked first both globally and in North America, leading with the $4.75 billion acquisition of software maker Marketo in October.
Alibaba ranked second on the R3 global list after spending $2.2 billion to purchase a minority stake in digital marketer Focus Media last July. AT&T followed IPG in fourth place worldwide with its much-hyped $1.6 billion acquisition of AppNexus, and Accenture ranked fifth worldwide with 11 buys collectively worth $1.2 billion.
The leading region in M&A activity, North America, saw a 22 percent growth in transactions to 259 deals last year and a 229 percent increase in the value of those deals to $22.3 billion—the highest M&A spend in the region over the past three years, according to the report. The five leading spenders were Adobe, IPG, AT&T, Insight Venture Partners (for its $1.2 billion purchase of Episerver) and Salesforce (for two transactions worth $858,000).
The report revealed that the number of mar-tech and digital full-service shops bought in 2018 worldwide rose by 95 percent and 90 percent, respectively, while acquisitions of creative and media agencies fell by 38 percent and 39 percent. The value of creative agencies also dropped in 2018 by 48 percent, according to the report, while there was an increasing demand for production houses. And investment in CRM rose an incredible 450 percent last year.
“We’ve noticed a few idiosyncratic acquisitions this year,” Paull said. “This indicates a real urgency in which companies are aiming to transform themselves. The measure of success is whether they will be able to leverage, not only the technology, but also the people who develop and maintain that technology.”
Paull noted that while deals such as Publicis Groupe’s purchase of a controlling stake in data marketing firm Soft Computing, announced last month, “were transformative, they still only represent a small percentage of overall deal flow.” The only regions where Publicis was ranked as a big spender by R3 were Europe, the Middle East and Africa, where its acquisitions of Kindered Group, Xebia France and Soft Computing worth collectively $421,000 earned it a second-place slot (out of 15) and were only outweighed by Accenture’s $564,000 spend on four deals in that region.
The other holding companies to place in the top 15 of top spenders worldwide were Dentsu (ranked seventh with a spend of $970,o00), Omnicom (10th, $558,000) and WPP (14th, $464,000).