M&A in the UK media and marketing services sectors: Q2 2024
Activity dips after good start to the year
82
deals completed
-7%
Moore Kingston Smith
Marketing Services Index
46%
deals backed by PE
Our view of the market
M&A in the UK media and marketing services sectors got off to a good start in 2024 but activity has slowed in the second quarter. We counted just 82 transactions in Q2, a 23% decline on the 106 deals we recorded in Q1. Looking at historical data, we see that the second quarter is usually quieter than the first, and market timing will always have an effect. Nevertheless, the slowdown this year is significant – potentially reflecting the slower than anticipated rebound in trading.
The percentage of transactions involving private equity has ticked up slightly in Q2. We expect to see much more PE involvement in the latter part of the year, once anticipated reductions in interest rates take effect. The major networks and the challengers have been relatively quiet on the acquisition front in Q2 but we have seen renewed activity from the consultants.
It appears that the drivers of increased M&A activity – an improving economy, expected lower interest rates, business owners worried about possible changes in the UK tax regime’s treatment of capital gains following a change in government – are taking longer to translate into higher numbers of transactions than we might have expected. In addition, the stimulus effects of various local and global events – the UK general election, the Euros, the Paris Olympics and the US presidential election – will not have filtered through to marketing and advertising companies’ accounts yet but will be apparent later in the year. At that point, we might expect more business owners to consider inviting offers for their companies.
Quarterly deal volume
Trending: media
In Q2 2024, media tied with advertising as the favourite marketing services category among acquirers: each category accounted for 14% of all the marketing services deals we recorded.
In May, Moore Kingston Smith’s corporate finance team advised Total Media Group – which includes the award-winning behavioural planning and media buying agency Total Media and behavioural consultancy Behave – on its sale to Mediaplus, Europe’s leading independent media agency and a subsidiary of Europe’s largest independent agency group Serviceplan. The deal represents the coming together of two of the largest independent media agencies in Europe.
Spotlight on: martech
In the marketing services sector, while most deals involved the acquisition of traditional service-led agencies, 19% of the deals we recorded in Q2 were technology-led. This is slightly up on the 18% we recorded in Q1. However, it remains well below the level we saw a couple of years ago, where technology-led transactions tended to represent around a third of all deals. The technology market is maturing: the tech deals that get done now reflect a move away from the growth-at-all-costs mentality of a couple of years ago, to a more considered efficient growth approach.
55% of the technology-led transactions we recorded in Q2 2024 related to martech companies – companies developing and using technology to assist with a digital marketing strategy – while 27% were adtech and 18% were mediatech.
Henry Waugh, Corporate Finance Manager, says: “In the dynamic landscape of digital marketing, martech continues to play a pivotal role in shaping strategies and driving innovation.”
Q2 2024 deal activity in the marketing services sector
Notable UK martech deals
The UK’s Bluprintx strengthened its marketing automation capabilities in North America with the acquisition of Virginia-based Definitive Results, an Adobe, Hubspot, Oracle and Salesforce partner.
In April, Electric Guitar, an LSE-listed special purpose acquisition company, announced that it was acquiring 3radical, a marketing technology company for consumer data acquisition and audience engagement solutions, and transferring its listing from the LSE’s Main Market to AIM.
Major holding companies
Notable transactions
In what was a relatively quiet quarter for the majors, four of the large marketing services networks – WPP, Interpublic, Dentsu and Omnicom – made no new acquisitions in Q2. Publicis made one, while Havas continued its recent buying spree with the announcement of two additional acquisitions.
In April, Havas announced the acquisition of French data consultancy firm TED Consulting and followed that in May with the acquisition of Middle Eastern shopper marketing and e-commerce company Liquid.
In June, Publicis announced the acquisition of Downtown Paris, a creative and production house specialising in the luxury and beauty field.
Challenger networks
We saw a fair bit of activity from the challenger networks in Q1. Q2 was quieter by comparison but some continued to buy and build.
In May, serial acquirer Stagwell bought Montreal-based Luxine, a full-service PR and influencer marketing agency. This deal followed Stagwell’s April purchase of Brazilian digital PR agency PROS.
Also in May, Together Group announced it had acquired Californian digital agency Metajive and its subsidiary Pixel Perfect.
The most active acquirer was Serviceplan’s Mediaplus. In May, it acquired the UK-based Total Media, a deal which Moore Kingston Smith advised on, as mentioned earlier. This followed two deals completed in April: the purchase of German data and CRM specialist LAYA, and the acquisition of a majority stake in French healthcare media agency CMS.
In April, Accenture announced that it was acquiring erstwhile UK challenger network Unlimited, which comprises TMW, Walnut, Health Unlimited and Nelson Bostock. Unlimited will become part of Accenture Song. The acquisition of Unlimited is the latest in a series of investments by Accenture Song, following the acquisitions of GemSeek, Mindcurv, Work & Co, Rabbit’s Tale, ConcentricLife, Fiftyfive5 and The Stable.
One deal that didn’t happen in Q2 was the attempted takeover of The Mission Group by its fellow AIM-listed rival Brave Bison. In May, Brave Bison approached the board of Mission with an offer worth c. £27 million. This was batted away as opportunistic by Mission. Brave Bison went back with an increased offer worth c. £32 million, which was again rejected by Mission. Following this second rejection, Brave Bison confirmed it was withdrawing its interest in Mission and would not be making a formal offer to its shareholders.
Marketing services industry stock performance
In Q2 2024, the strong bull run in global stock markets that had been a feature of the previous two quarters began to slow. The S&P 500 was up by 4% in Q2. The FTSE 100 was also up by 3%. However, media companies largely saw their share prices slip in the same period. The Moore Kingston Smith Marketing Services Index was down 7% in Q2. Of the 13 companies in the Moore Kingston Smith Marketing Services Index, just two ended the quarter in positive territory.
We had 14 companies in the Moore Kingston Smith Marketing Services Index in Q1. However, Valtech’s acquisition of Kin + Carta completed in Q2, resulting in Kin + Carta’s shares being delisted, meaning our index now consists of 13 companies.
Q2’s star performer was our worst performer from Q1 – Stagwell – which, in a turnaround of fortunes, saw its share price increase by 10% across the period. Stagwell announced its most recent set of results on 1 May. They were well received by the market, reflected in CEO Mark Penn’s upbeat statement that the company was “on target for 2024 with a return to growth and strong margin expansion” and talk of “double-digit growth” and “record new business”.
Our worst performer in Q2 was Enero. It had been enjoying a good run, with its share price up by 10% from the start of the year. However, on 21 May it released a trading update saying it was impacted by macroeconomic headwinds in the adtech market, so expected to report 2024 revenues and EBITDA that would be significantly down on the previous year. Investors reacted negatively and Enero’s share price ended Q2 34% down.
Moore Kingston Smith Marketing Services Index Q2 2024
Private equity
PE-backed investments accounted for 46% of all deals completing in Q2 2024. Which is only slightly up on the previous quarter but remains somewhat below the recent historical average. Interest rates have not yet come down and leveraged deals remain challenging to put together in a high-interest rate environment. However, the anticipated lower rates towards the end of 2024 should ease the situation, so we do expect to see a resurgence in leveraged PE-backed transactions later in the year.
In Q2, Waterland Private Equity, which already has a significant interest in the UK’s media and marketing services sectors, through its portfolio companies AFO (formerly Markettiers4DC) and Sideshow, announced its investment in a new London-headquartered creative group, Further. This has been formed through the merger of branding agency DesignStudio, motion design studio Analog, and immersive experience pioneers PixelArtworks.
Towerbrook Capital-backed fashion PR group The Independents followed its purchase of London-based Kennedy and Paris-based Atelier Athem in Q1 by acquiring London-based creative agency Sunshine in April.
In June, social and influencer agency Kairos Group announced it was rebranding as NewGen, following a multi-million pound investment from BGF. Founded in 2015, Kairos Group is known for high-impact marketing campaigns targeting Gen Z and video gaming audiences.
Notable UK mid-market deals
Valtech, an experience innovation company, completed its acquisition of UK-listed digital transformation consultancy Kin + Carta in a deal worth £239 million. Valtech is backed by PE house BC Partners, and had to trump an initial bid from PE house Apax to win control of Kin + Carta.
PE house Intermediate Capital Group acquired London-headquartered professional publishing and information business Law Business Research for a reported c. £650 million from US PE firm Levine Leichtman. This is the third private equity owner in recent years for Law Business Research. It was originally acquired by Bowmark Capital in 2013 and then sold to Leichtman in 2017.
In April, Hybrid, an agency specialising in education media and marketing services, acquired Crisp Digital, a digital development agency. This is Hybrid’s second acquisition since it secured a £13 million investment from PE partner LDC in June 2021, following that of Prompt Marketing in June 2023.
In June, full-service marketing agency, Croud, acquired Vert Digital, a digital marketing and advertising agency based in Atlanta. This is the fifth acquisition Croud has made with the support of private equity backer LDC.
Percentage of PE-backed deals
“Private equity firms have maintained their presence in the media and marketing services space through bolt-on deals in the main. The increased cost of debt capital has forced many PE houses to rely on equity-heavy transaction structures, encouraging sponsors to focus on expanding their portfolio businesses rather than chasing large platform acquisitions. We do expect the number of platform acquisitions in the space to increase again as interest rates come down as the attractiveness of the sector endures.”
Paul Winterflood, Corporate Finance Partner at Moore Kingston Smith
TV, film and entertainment
In the TV, film and entertainment sector, gaming transactions proved to be the most popular with acquirers in Q2. They accounted for 44% of the deals we recorded, a sizeable increase on the 14% that we recorded in Q1.
Production services deals were the most prominent in Q2, accounting for 50% of the transactions we recorded in this space. Technology-led transactions accounted for a further 29%, while pure content plays accounted for 21% of the deals recorded in Q2.
In gaming, we noted the IGF-sponsored MBO of Birmingham-headquartered Centresoft, a multi-format specialist distributor of video games. Centresoft’s management acquired the company from its parent, Activision Blizzard, owned by Microsoft.
Notable UK TV, film and entertainment deals
In June, TV and entertainment group Banijay acquired independent scripted production company Caryn Mandabach Productions, the company that produces and owns the BAFTA-winning global hit drama series Peaky Blinders.
In Q2, immersive attractions specialist Little Lion Entertainment, which produces The Crystal Maze LIVE, announced it had acquired The Ents Inc, producer of the arena game Chaos Karts.
Q2 2024 deal activity in the TV, film and entertainment sector
Publishing
Consumer publishing was in the top spot in Q2 2024, representing 64% of all the publishing deals we recorded. Academic and professional publishing came second, accounting for 27% of publishing transactions.
In May, London-listed Bloomsbury Publishing announced that it had bought Rowman & Littlefield Publishing Group’s academic publishing business for $83 million. Bloomsbury, best known for publishing the Harry Potter series, said that this was its biggest acquisition to date. Bloomsbury Chief Executive Nigel Newton said: “This acquisition is a game-changer for Bloomsbury. Their 40,000 academic titles added to ours will make us a significant US academic publisher, growing Bloomsbury’s academic and digital publishing presence in North America, opening new markets and publishing areas to Bloomsbury, and is a key milestone in the delivery of our long-term growth strategy.”
Notable UK mid-market deals
LSE-listed news publisher National World bought Athletics Weekly as part of its strategy to focus on higher-value, specialist content.
Online design magazine Design Week was acquired by its web development company Interconnect, saving it from closure. Interconnect purchased the company from its previous owner Xeim, which also runs Marketing Week and Creative Review, after working as Design Week’s service provider since 2015. The news came after the magazine had announced its imminent closure after 38 years.
Q2 2024 deal activity in the publishing sector
Outlook
After the rebound we witnessed in the first quarter of this year, it is disappointing to see M&A in the UK media and marketing services sectors fall back again in Q2. We believe this setback is temporary, as the drivers for an increase in M&A activity are apparent. However, given that deal processes take months to complete, these drivers are not yet translating into an increase in the numbers of actual deals done. We expect to see growth in the market through the second half of this year and beyond.
“The outlook for agencies’ underlying businesses is improving, and we anticipate that more shareholders in successful businesses will start to evaluate their options once they have a solid set of results to go to market with. When they do, they are likely to be met by strong acquirer appetite.”
Paul Winterflood, Corporate Finance Partner
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Methodology
In compiling our deal tracker we use Pitchbook, an international financial data provider that gives access to comprehensive data on the private and public markets. We analyse every deal with either a UK buyer or UK seller (or both) and where the target company is classified as marketing services, publishing or TV, film & entertainment, the transaction is entered into the deal tracker. We classify marketing services into sixteen sub-categories; TV, film & entertainment into seven sub-categories; and publishing into four sub-categories. As well as the data extracted from Pitchbook we have used information from the following sources: koresoftware.com, marketingdive.com, adexchanger.com, take1.tv, nftplazas.com, havasgroup.com, wpp.com, thedrum.com, deadline.com, businesswire.com, ft.com, fortune.com, themarketinpractice.com, antin-ip.com, wildstone.co.uk, media4growth.com, pehub.com. Any assumptions, opinions and estimates expressed in the information contained in this content constitute the judgment of Moore Kingston Smith LLP and/or its associated businesses as of the date of publication and are subject to change without notice. This information does not constitute advice and professional advice should be taken before acting on any information herein. No liability for any direct, consequential or other loss arising from reliance on the information is accepted by Moore Kingston Smith LLP or any of its associated businesses.
