UPDATED: RXP joins digital agency acquisition frenzy and takes The Works
- 02 August, 2017 14:57
From left: Douglas Nicol, Kevin Macmillan, Damian Pincus
The line between marketing and technology is blurring, and agencies that don’t make the effort to unite brand and creative capability with technology and customer experience design risk becoming obsolete.
That’s the view of The Works co-owner, Douglas Nicol, who spoke with CMO after announcing the agency’s sale to ASX-listed digital and ICT services player, RXP Services, in a deal worth up to $33 million.
RXP has joined a growing throng of traditional ICT consultancies extending their reach into the agency space, and acquired The Works for an initial payment of $25 million split over 12 months, followed by an additional 12-month payment of up to $6m, and a 24-month payment with an overall cap of $33m, based on earnings. The Works is expected to generate annual revenues of $16.5 million in FY18 with an EBITDA of $3.9m.
RXP said the acquisition was about expanding its digital customer experience delivery capability as well as expanding its presence in the NSW market. The Works is a 14-year old digital and creative agency with a range of high-profile clients including Sunbeam, Optus, Jim Beam, ING Direct, the AFL, Brother, Children’s Panadol and the Woolworths customer loyalty program, Rewards.
RXP CEO, Ross Fielding, said it just made sense to buy The Works. He told CMO the group had been looking to fill a gap in its capabilities around brand strategy and creative services.
“It is a really strong fit with RXP’s evolving business model as we continuously seek to grow our digital services offering,” he said. “The future is all about digital, and the acquisition of The Works significantly enhances our capabilities in this area.”
While the two companies have some clients in common, Fielding noted RXP’s core internal customer had been the IT leader, while The Works has been focused on the CMO, CFO and product management. The acquisition was a reflection of where the tech and services dollars are moving to: Namely, marketing, product and customer service teams, he said.
For Nicol, that disconnect is a symptom of the problem many companies are facing as they strive to cope with changing customer needs, and illustrates the need for marketing and technology capability to come together. Over recent years, it’s been made clear delivering on a brand promise requires agencies to do more than just support clients around their communications and creative needs, he said.
“We’re in the business of creating a brand promise… But we felt that promise often wasn’t delivered through customer or user experience in a mobile centric world,” he said. “The role of a brand promise is different today. What excited us when we first met the RXP team was they had incredible grunt and understanding of what enables amazing customer experience and real technology expertise.
“It allows us to take the best of what we do in customer insights and knowing what consumers want, and delivering on the brand promise through extraordinary experiences via every touchpoint.”
For Nicol, what mobile has also done is bring brand engagement efforts much closer to the transaction. “There was a time when ad agencies and CX agencies weren’t so close to it. Now, we’re so close to the transaction point because it’s on mobile within a few clicks,” he commented.
“Issues like data quality and security are all a part of our world now and comms don’t solve those things. We need to understand sales, marketing and operations work in an organisation and come together.”
The Works will remain a standalone organisation, collaborating with RXP on an as-needed basis driven by client demand. Nicol said the two are already working on a couple of projects together around utilisation of chatbots and voice-based marketing in customer engagement.
“We’re witnessing a change in audience away from interruption advertising, and into channels such as messaging apps,” he said, adding there are 11.8 million Australians using messaging apps on average five times per day.
“That’s a huge challenge for marketers: How do you engage a customer on a messaging app that’s encrypted, and where you can’t buy advertising?” he asked. “We see chatbots as not just a nice-to have, but a mission critical thing to help brands crack that messaging app market.”
RXP listed on the ASX in November 2011 and was established via a combination of organic capability and acquisition. The group supplies ICT professional services to more than 200 clients across Australia and Hong Kong and has 750 staff.
The deal specifically diversifies RXP’s client base, and important consideration as it looks to grow in the NSW market, Fielding said. Up to 85 per cent of The Works’ revenue is derived from the premier state.
In a statement, the digital consulting group said the deal is expected to be EPS accretive in FY18 by more than 10 per cent and noted synergies worth $1.5 million in the next financial year.
In its market statement, The Works co-founder, Damian Pincus, said clients were increasingly looking to engage with consumers at a deeper and more personal level, making digital transformation players like RXP strong partners.
“In RXP, we have found a future focused, innovative and culturally aligned partner at a time when the business of marketing communications continues to undergo significant disruption,” he said. “This is an exciting partnership and will complement our core brand strategy and creative offering, enabling us to further deliver for our clients and people."
The Works joins a growing list of marketing and creative agencies being acquired by ICT services and professional consultancy firms as they look to shore up their positions as strategic digital partners to clients.
Other recent acquisitions include Accenture’s purchase of The Monkeys and Maud in May, along with digital agency, Reactive Media, and innovation consultancy, Fjord; Deloitte’s acquisition of digital communications agency, The Explainers, last August, plus Salesforce Marketing Cloud specialist, Cinder Australia, social analytics adviser, Digivizer, and spatial design and CX group, Mashup; and KPMG’s purchase of customer brand and marketing advisory firm, Acuity Research and Insights, in June.