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Digital Agency Landscape I August 2015 I page 1Strictly private and confidential
Digital Agency Landscape I August 2015 I page 6Strictly private and confidential
CAPITALMIND
MARKET LANDSCAPE
TRANSACTIONS
TRADING MULTIPLES
INDUSTRY BUYERS
INDUSTRY EXPERIENCE
Digital Agency Landscape I August 2015 I page 7Strictly private and confidential
WORLDWIDE TRANSACTION ACTIVITY PER COUNTRY
Analysed over 600 transactions up from 2006, we see most target companies in this sector are European companies,
followed by US companies. A major increase in deal activity has been noticed in Brazil and South Africa over the last
couple of years.
Digital agency transaction activity
Digital Agency Landscape I August 2015 I page 8Strictly private and confidential
EUROPEAN ACTIVITY PER COUNTRY
Numbers are proving that digital agency deal activity runs at a strong pace. Europe counts for 41% of the deals
through 2006 – 2015.
Digital agency activity
� Of all the transaction in this sector, 41,46% of the deals involved European targets. Especially in the UK, France, Germany and the Netherlands (!) activity has
been noticed. Up from the year 2012, Netherlands has always been in the Top 3 European countries in terms of target companies.
� The Big 4 advertisement companies are main buyers in this sector, counting for 61% of all the deals (worldwide). From the Big 4, WPP by far has been the most
acquisitive party. Worth to notice is also the substantial percentage of transaction, 17%, in which neither a Big 4 company nor Dentsu Inc. has been the buyer.
32%
4%
19%
22%
6%
17%
Transactions by acquirer (Worldwide)
WPP Plc Interpublic Group of Companies
Dentsu Inc. Publicis Groupe
Omnicom Group Other
2006
2009
2012
20150
5
10
15
20
25
Transactions per country per year (Europe)
Digital Agency Landscape I August 2015 I page 9Strictly private and confidential
ACTIVITY PER SUB-SEGMENT
Most wanted targets, based on key activity, turned out to be digital marketing agencies. In addition, web agencies and
advertisement companies have been popular targets.
Digital agency activity
20062007
20082009
20102011
20122013
201420150
5
10
15
20
25
30
35
Key activity by target by year
Digital Agency Landscape I August 2015 I page 10Strictly private and confidential
DIGITAL MARKETING
Deal activity in the sector is increasing, the overview below provides Benelux transactions. Capitalmind advised on
several deals, the most recent one being the merger between DQ&A and Incubeta.
Deals by Capitalmind
WPPPublicisGroupe
Omnicom Group
DentsuInterpublic
GroupOther
Digital Agency Landscape I August 2015 I page 11Strictly private and confidential
CAPITALMIND
MARKET LANDSCAPE
TRANSACTIONS
TRADING MULTIPLES
INDUSTRY BUYERS
INDUSTRY EXPERIENCE
Digital Agency Landscape I August 2015 I page 12Strictly private and confidential
TRADING MULTIPLES
Trading multiples
The overview below provides an overview of current trading multiples of the main Advertising Holding companies
Trading multiples
� The trading multiples method is based on recent Market Cap valuations of listed companies in the market.
� Most of the times a discount is used for mid-market companies. The main reason therefore is a difference in risk comparing with larger, listed companiesand less liquidity of shares. On average a 20% discount is realistic when used for valuing mid-market companies.
Company Date Market Cap Enterprise Value (EV) EV / Revenue EV / EBITDA
Digital Agency Landscape I August 2015 I page 14Strictly private and confidential
TYPICAL DEAL STRUCTURE FOR LARGER TARGETS
… but they tend to deviate if the targets is larger / international
Long earn-out periods for ‘local’ players of limited size
- For larger, ‘strategic’ assets pricing is substantial higher
- The price compared to own trading multiples is explained using (cost) synergies
0.0
5.0
10.0
15.0
20.0
25.0
30.0
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
Multiples, Margins & Size
0.0
5.0
10.0
15.0
20.0
25.0
30.0
EBITDA Multiples
Digital Agency Landscape I August 2015 I page 15Strictly private and confidential
CAPITALMIND
MARKET LANDSCAPE
TRANSACTIONS
TRADING MULTIPLES
INDUSTRY BUYERS
INDUSTRY EXPERIENCE
Digital Agency Landscape I August 2015 I page 16Strictly private and confidential
MAIN INDUSTRY BUYERS
Digital Agency Landscape I August 2015 I page 17Strictly private and confidential
ALTERNATIVE INDUSTRY BUYERS
Alternative buyers
So the main big buyers in this industry are the 5 biggest Advertising holding companies. What we’ve seen
before too though, is that these are not the only buyers in the industry, especially within the last years.
Who are these other the buyers (17% of the buyers)?
� Customers nowadays can move to a competitor more quickly and easily than ever and many products are becoming price-driven goods. This means that
customer experience is becoming vital to retain customers and companies with best customer experience will be winners. Digital agencies manage and create
customer experience, this is where the interest from ‘alternative’ buyers for digital agencies begins. Secondly, customers are becoming more independent,
meaning they investigate more their selves and they are buying products later on in the sales cycle. Again, companies that can control the (online) sales funnel,
digital agencies, are becoming increasingly important.
� Analysing this group of alternative buyers, we see increasing interest in digital agencies from: (i) IT services / consulting companies, (ii) Adtech companies, (iii)
Big data companies, (iv) Large software companies and (v) ‘other’ IT companies. Besides, advertising companies who don’t have a digital department yet are
buyers, as digital will play an important role in the future of the industry.
� Aside from Havas, also within this 17% group (17,3%), over the last couple of years several ‘alternative’ buyers have blend themselves into the
world of digital agencies. Recently, IT Service company Cognizant bought interactive marketing firm Cadient, Ensighten acquired marketing
analytics firm Anametrix and Alliance Data has acquired Conversant, a digital marketer. And these are just some of the examples.
Source: http://venturebeat.com/2014/11/13/why-digital-marketing-companies-have-become-tasty-acquisitions/; http://adage.com/article/digital/datacenter-agency-report-2015-charts/298214/; Headwaters Internet Advertisement update 2014Q2
…
Alternative example buyers
IT Services / Consulting companies
Adtech companies Big data companiesLarge software
companiesIT Other
Digital Agency Landscape I August 2015 I page 18Strictly private and confidential
CAPITALMIND
MARKET LANDSCAPE
TRANSACTIONS
TRADING MULTIPLES
INDUSTRY BUYERS
INDUSTRY EXPERIENCE
Digital Agency Landscape I August 2015 I page 19Strictly private and confidential
INDUSTRY TRACK RECORD (1/3)
A strong industry experience
� Expand Online has merged with TamTam. Expand Online is an onlinemarketing agency specialised inoptimised online campaigns via searchengine marketing, display and webanalytics. Tam Tam is a full servicedigital agency.
� DQ&A Media Group merged withIncuBeta. DQ&A Media Group is ahighly innovative specialist in digitaladvertising technologies. IncuBeta is aglobal leading provider of digitaladvertising services and mediasolutions.
� Social1nfluencers has been partly soldto SBS/Sanoma. Social1nfluencers is anetwork of popular videographers,especially among teenagers
� IPG Mediabrands owned by US based Interpublic Group acquired Traffic4U. Traffic4U is a digital marketing agency focused on search engine optimization, search advertising and conversion rate with a market leading position in the Netherlands
Digital Agency Landscape I August 2015 I page 20Strictly private and confidential
INDUSTRY TRACK RECORD (2/3)
A strong industry experience
� Tiin Capital and PPM Oost invested in Informaat CXP. Informaat CXP will use these funds to further develop CXP and to roll-out the company internationally.
� Informaat CXP is a Customer Experience Platform that allows companies to service customers across all possible touch points.
� IPG Mediabrands owned by US based Interpublic Group acquired bGenius. bGenius is a bid management software company servicing online marketers to optimize and manage campaigns in different search engines in one system.
� PPM Oost invested in Service2Media. This investment will strengthen Service2Media’s position and help to expand their business. It will be used by Service2Media’s R&D team to bring the App Lifecycle Platform™ – M2Active to the next level.
� Service2Media is a developer of a (mobile)app platform allowing creation and running of (mobile) apps.
� Netsociety is acquired by Aegis Media, the UK communication and media company. Aegis will integrate Netsocietywith its Dutch based subsidiary iProspect, provider of leading digital performance marketing solutions.
� Netsociety is a leading Dutch online media company.
Digital Agency Landscape I August 2015 I page 21Strictly private and confidential
INDUSTRY TRACK RECORD (3/3)
A strong industry experience
� IceMobile merged with Brandloyalty, the globally active, leading consumer loyalty company.
� Icemobile is a developer of mobile applications, including leading brand applications for Ahold (Appie) and ABN AMRO, and Sara Lee (Douwe Egberts).
� Videostrip is acquired by RTL Nederland, the Dutch subsidiary of leading European audiovisual group. Videostrip’s technology and relationships with advertisers enables RTL to monetize its premium content online.
� Videostrip is the largest Dutch multimedia video advertising network.
� Cleafs was acquired by Affilinet, the leading European affiliate network active in 7 countries in Europe, serving over 2000 affiliate programs. Affilinet is part of German listed United Internet AG.
� Cleafs is the leading affiliate advertising network in the Netherlands, specialized in travel, ticketing, parking, living and fashion.
� Private Plus Fund (Newion Investments) and PTV invested in Service2Media.
� Service2Media is a developer of a (mobile)app platform allowing creation and running of (mobile) apps.
Digital Agency Landscape I August 2015 I page 22Strictly private and confidential
Award winning international corporate finance advice