Unconventional buyers for digital agencies is perhaps the biggest trend to come out of agency mergers and acquisitions in the first half of this year, according to a deals report by global marketing consultancy R3.
The cohort of so-called unconventional buyers includes Domino’s Pizza, Yelp, Time Inc., Salesforce, Periscope, Shiseido, Indiegogo, Snap, Globant, Beringer Capital and the Stagwell Group.
Meanwhile, agency holding company Publicis, which is skipping the ad industry’s annual meeting in Cannes next year to help fund an AI project called Marcel, did not make a single acquisition in the first half, R3 said.
Among the purchases made by unexpected buyers: Domino’s shelled out $6 million for digital publishing and communication agency IPG Connect. Crowdfunding platform Indiegogo snagged Agency of Trillions for $10 million. The Stagwell Group, founded by former Microsoft exec Mark Penn, made five acquisitions totalling $69 million, according to R3, which defined buyers as “unconventional” if they do not usually make acquisitions in the ad marketplace or have not been on R3’s report before.
Marketing cloud juggernaut Salesforce purchased design agency Sequence — whose roster of clients include Apple, Best Buy and Chipotle — for $56 million. Meanwhile, Yelp dished out $20 million for Turnstyle Analytics, which provides insights into things like store visits, consumer behavior and user web activity, among other things. And beauty care provider Shiseido paid $11 million for creative agency Jwalk.
“Domino’s wants to own more of the demand chain,” Greg Paull, co-founder and principal at R3, said. “We’ve seen this trend before with Shiseido and others. More and more marketers are going to want greater in-house control of their marketing.”
Although Domino’s deal for IPG Connect might surprise some, roughly 450 of the staff of 800 at the pizza giant’s Ann Arbor, Mich., headquarters work on technology, Dennis Maloney, chief digital officer at Domino’s, previously told Ad Age.
“For CMO’s, it means an unprecedented choice when it comes to content and contact partners,” Paull said.
Overall, M&A activity is down within the marketing communications sector, R3 said. A total of 184 deals worth a total of $4.1 billion were tracked through the first six months of 2017, a 39% decline when compared to the same time a year ago. Paull says the decrease is the result of a “significant slowdown in China,” which only had a total of 12 deals in 2017, down 45% year-over-year.
In sharp contrast to the first half of 2016, there has been an uptick in M&A activity from agency holding groups.
Agency holding groups accounted for roughly $1.5 billion of the total deals tracked thus far. Dentsu led the pack, spending $526 million on 15 acquisitions. Sir Martin Sorrell’s WPP made three more deals than Dentsu, but spent a total of $315 million, according to R3. (On Thursday, WPP said it had bought Thjnk, one of Germany’s top five independent agencies.)
According to R3, WPP’s acquisitions have been largely focused on digital, while Dentsu is more evenly spread across digital, creative, media and others.