Marketing service industry mergers and acquisitions down in 2019

R3 analysis shows value of M&A in martech and adtech decreased 55 per cent in Asia-Pacific

Mergers and acquisitions (M&As) in the marketing services industry were down 15 per cent in 2019, according to a new report.

R3, an independent consulting firm, assessed 489 M&As in the marketing services industry in the period of January to December 2019, with US$27.7 billion invested overall. Over the year, the number of deals in APAC slipped by 9 per cent, with value decreasing by 55 per cent.

The report said holding companies pulled back on quantity, cutting the number of M&As by more than half, though year-on-year spend remained constant. Publicis Groupe was the top buyer, with Dentsu leading holding groups in total number of transactions (12). Among traditional holding companies, only Publicis ranked in the top 10 acquirers, the first time so few have appeared in this list.

“Buyers have been looking at investments that will strengthen their position in an uncertain geopolitical climate,” R3 principal, Greg Paull, said. “Though martech and adtech have driven M&A value, there has been more interest in acquisitions that will increase regional presence and serviceability.

“Restructuring has shifted attention away from volume and forced holding companies to attend to integration. It’s been about what’s going to help win new business.”

North America led M&A value (US$19.9bn) by region and volume, while trade tensions and increased regulatory scrutiny continued to negatively impact the appetite for outbound investment in China and Asia Pacific.

Private equity groups contributed 44 per cent more in deal value globally (US$6.6bn), with Bain Capital and Blackstone making two of the top five deals in 2019. Holding companies followed behind, though even with Publicis Groupe’s purchase of Epsilon, value of acquisitions only clocked an 8 per cent increase from the previous year. 

“The ‘buy and build’ strategy of cash-rich PE-backed agencies over the past few years has kept the M&A landscape buzzing,” Paull said. “We expect to see continued PE investment in marketing services in the new year, though transactions are likely to be more modest.

Investment in APAC, for example, slowed though it remains of interest to buyers wanting to address marketplace complexity in the region, Paull added.

Martech companies were the most active buyers, increasing the number of deals made by 68 per cent as they look to expand their capability into areas like analytics, email and search. Though buyers favoured martech and adtech companies in 2019, experiencing the most growth were production houses and shopper/CRM/promotion companies.

“More clients are looking for enterprise-wide transformation and this is leading buyers to balance their portfolios,” Paull said.

The top 10 deals in 2019 included data and research (Kantar, JD Power), retail and customer experience (Triad, Rightpoint) and CEO consulting (Teneo).

North America led M&A activity globally as trade uncertainty and growing protectionism limited interest in outbound transactions. The number of deals made in North America increased in 2019 by 7 per cent, followed by EMEA which experienced year-on-year growth in both volume and value despite speculation around the impact of Brexit.

China’s M&A landscape experienced its weakest year in the past decade, with deal activity in marketing services decreasing by 54 per cent. 

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