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2016
A YEAR TO BE CONTENT WITHA Review of M&A Activity and the Global Marketing Services Networks
A seamless combination of
KNOWLEDGE, INSIGHT AND EXPERTISE
Introduction 03
- Introduction- The Importance of Being Content- A Review of M&A Activity- Appendix
AGENDA
04 Introduction
WE SHARE OUR CLIENTS’ PASSION AND AMBITION: FOR WHAT THEY’VE ACHIEVED, THE FUTURE THEY’RE BUILDING AND THE INDUSTRY IN WHICH THEY WORK
Introduction 05
JEGI and Clarity are the leading independent investment banks for the global media, information, marketing, software and tech-enabled services sectors. With offices in New York City, Boston and London, we have a strong and growing presence in both North America and Europe.
We provide clients with a global network of prospective buyers and senior decision-makers, as well as vast industry knowledge, perspective and intelligence. This affords our clients seamless access to deep market insights and a wealth of M&A experience, enabling us to deliver them great results.
Over the past four years, JEGI and Clarity have forged a powerful partnership, co-advising on multiple transactions and collaborating on numerous other efforts. Collectively, the firms have advised on nearly 100 transactions in this time.
INTRODUCING OUR INTERNATIONAL PLATFORM
IMPORTANT MILESTONE
2016 represents the first year that we are co-authoring our annual review of Global Marketing Services Network M&A activity. In conjunction with this, we are proud to announce the re-branding of both our firms, an important milestone that aligns us more closely together and highlights the power of our international platform when representing our clients worldwide.
Mobile & Internet
Data & Analytics
Cont
ent &
Info
rmat
ion
Cloud & SaaS
MARKETING SERVICES& TECHNOLOGY
SOFTWARE &TECH-ENABLED
SERVICES
B2B
& B
2CM
EDIA
BU
SINESS IN
FOR
MATIO
N
& IN
TELLIGEN
CE
JEGI and Clarity proved to be great advisors, as well as great bankers. Their level of preparation and consultative approach made a big difference. And the quality of their work and advice during the process was even more impressive.
André LejeuneChairman & CEO, Selligent
06 Introduction
THE RETURN OF THE KING...
In 2015, Content Marketing once again was back “in vogue” as brands and media agencies sought to address the rise of “content apathy” with strategies to cut through the blizzard of noise - heralding the return of the Content King.
From the much lauded Cannes Lions launch of Truffle Pig, the Content Marketing joint venture between WPP, Snapchat and Daily Mail, to targeted M&A activity like that of Dentsu Aegis’ acquisition of John Brown Publishing in the UK, brands and agencies continue to refine their approach to delivering the right content to the right people at the right time.
A truffle pig finds the rare and tasty. With the need for story-driven marketing on our sites and those of other media companies, and new ad formats like Snapchat, brands need a truffle pig.
Jon SteinbergFormer CEO, Daily Mail North America
According to PQ Media, Content Marketing revenue is forecast to increase from US$200 billion in 2016 to US$313 billion by 20191. On pages 15-17, we highlight three key trends that are driving this growth and shaping the strategies and investment decisions of the major players in this ecosystem.
On the advisory side, we continue to remain active in the space, having advised leading US Content Marketing companies TMG and McMurry on their merger and then sale to private equity firm Wicks Group. We then subsequently advised Manifest Digital, a leader in digital experience design, on their sale into the platform, which was then rebranded as Manifest.
1 PQ Media Global Content Marketing Forecast 2015-19
US$200BN
US$313BN
Content Marketing revenue is forecast to increase from
in 2016 to
by 2019
IN A DIGITAL WORLD OVERFLOWING WITH CONTENT, CONSUMERS CRAVE QUALITYMARTIN SORRELLCEO, WPP
Introduction 07
GLOBAL NETWORK M&A ACTIVITY REMAINS BUSY AS USUAL
In 2015, dealmakers in the marketing services sector kept very busy. The Global Networks undertook more than 100 transactions for the fourth consecutive year, and we expect this momentum to continue into 2016.
Across the sector, 116 deals were completed by the Global Networks in 2015, against 132 in 2014, and an average of 95 over the past eight years. In keeping with recent tradition, WPP was the busiest acquirer, completing 44 transactions in 2015 alone. The next most active was Dentsu with 26 transactions, overtaking the historically acquisitive French global giant, Publicis, which reduced its focus on M&A, preferring to concentrate on organic growth and integrating Sapient.
Although the Global Networks are still showing interest in emerging markets from an M&A perspective, 2015 also saw a marked increase of activity in more mature markets, such as Australasia, Germany and France. Collectively, these three regions saw 29 deals completed in 2015, versus 13 in 2014.
Across the sector, a total of
116 deals were completed by the Global Networks in 2015 against an annual average of
95 over the last eight years
WPP CONTINUES TO LEAD THE WAY
Among the Global Networks, WPP continues to dominate M&A activity by number of deals, completing 44 transactions in 2015 alone.
As has consistently been the case in recent years, both North America and the United Kingdom remained the most favored destinations for Global Network attention, with 21 and 15 deals in 2015, respectively.
08 Introduction
COULD THE HAVAS RUMOR MILL FINALLY RING TRUE IN 2016?
The mega-merger rumor mill has been somewhat quiet since the failed Publicis Omnicom combination. However, increasing commercial activity over the past 12 months between Havas and Vivendi Group (incorporating UMG and Studio Canal), has seen the whispers return.
Bolloré Group’s ownership of and influence over both media giants is giving senior management extra incentive to explore ways to collaborate. One such venture included launching the “Global Music Data Alliance”, pairing Havas’ consumer insight and brand access with UMG’s music, merchandising and talent.
Though not transformational, such partnerships demonstrate how Bolloré is increasingly active in breaking silos and unlocking synergies, utilizing exclusive data and content from both Havas and Vivendi.
LONGER-TERM GRAND PLAN
Though 2016 will likely be too soon for a consummation between the two groups, it is certainly a merger the market is looking out for, especially with Bolloré insistent that his investment strategies are part of a longer-term grand plan.
Introduction 09
INDEPENDENT NETWORKS MATCHING THE PACE OF THE GLOBALS
With M&A activity among the Global Networks remaining hot, independents and private equity backed groups were also keeping up the pace, though principally focused on domestic markets. Ongoing discussions with these groups suggests that their M&A appetites will not let up in 2016.
In 2015, we found clients homes with regional consolidators, advising UK-based Splendid! on their exit to Creston and US-based NavigationArts on their sale to EPAM Systems, both leaders in the fast growing “digital transformation” consultancy markets.
In North America, retail/shopper marketing companies like Acosta and Advantage Sales & Marketing are actively looking at M&A opportunities, primarily domestically. Groups like performance marketing specialist, Merkle and advisory group, Teneo, demonstrated that they were prepared to broaden their international horizons and acquire in the UK.
EU mid-market M&A activity was dominated by UK and German buyers. Next 15, the UK-listed communications group made three acquisitions in the UK, while Service Plan Group, Germany’s largest independent network, continued its strategy of looking eastward to Russia and Hong Kong.
In Asia, BlueFocus, the Chinese communications group, concentrated primarily on its domestic market in 2015 with five acquisitions, while Japanese network Hakuhodo, via its international arm kyu, began its “Japan diversification program” in earnest through the acquisition of Montreal-based Sid Lee.
10 Introduction
INCREASING ACTIVITY FROM NEW MARKET ENTRANTS
As each year passes, we continue to witness a wider scope of acquirers in the marketing arena, outside of the Global Networks. 2015 WAS NO EXCEPTION.
In addition to large established corporates building out their marketing capabilities, there were a few notable new marketing networks launched that we expect to be acquisitive in the coming 12 months, providing alternative options for shareholders exploring their exit options.
Former Havas CEO, David Jones, launched You & Mr Jones, raising US$350 million to build a global “Brand Technology Group”. At the same time, he announced a majority acquisition of content crowdsourcing company, Mofilm.
Former CEO and Chairman of Engine Group, Peter Scott, launched Be Heard Group on the UK’s AIM market. A “digitally centric” network, Be Heard announced the acquisition of digital media buying and analytics agency Agenda 21, at the same time.
Mark Penn, the co-founder and CEO of Penn Schoen Berland, which was sold to WPP, launched The Stagwell Group, a PE fund focused on marketing services. Stagwell has announced three acquisitions to-date, including our sale of Nielsen’s NRG, a provider of research and analytics to the entertainment industry.
THE MESSAGE IS CLEAR
There is an ongoing blurring of lines, as the fast paced evolution of technology presents a huge opportunity for new market entrants to provide marketing solutions.
More than ever before, there is a broader array of potential acquirers for shareholders to consider upon an exit.
We advised Time Inc. on their acquisition of experiential marketing company, inVNT, to help brands and their marketing partners reach and deliver targeted audiences in new and innovative ways.
News Corp acquired social video ad platform, Unruly, to strengthen their Content Marketing offering and provide premium video and mobile inventory solutions to their advertising and agency partners. They paid US$90 million on closing with a further US$86 million payable, subject to performance criteria.
Salesforce joined the growing list of corporates strengthening their in-house and client-serving digital transformation capabilities by acquiring ÄKTA, a Chicago-based user experience and mobile application development consultancy, which will help Salesforce offer design-led services and tools on top of their software platform.
Other non-traditional buyers of marketing assets in 2015 included MasterCard, Pitney Bowes, Microsoft, Twitter, Infosys and many others.
Introduction 11
Though set against an increasingly uncertain geopolitical and global economic backdrop, we anticipate that global media and tech M&A will remain robust for the next 12 months given these trends.
STUTTERING IPO MARKETSLed by the Chinese market shutdown, IPO markets stuttered globally in H2 2015, driving sellers to seek alternative routes to realize value.
STRONG BALANCE SHEETSUS and EU corporates continue to benefit from accessible capital and strong balance sheets.
SUSTAINED INVESTOR ACTIVITYPrivate equity dry powder, estimated at US$1.32 trillion, as of June 20152 (i.e. PE has money to spend and pressure is mounting for deployment).
US$1.32TN
TRAPPED CASHUS corporates increasingly using cash “trapped” overseas (estimated at US$2.1 trillion as of March 2015)1 to drive investment activity.
US$2.1TN
2016 OUTLOOK
1 Bloomberg (March 2015) 2 Preqin Q2 Private Equity Fundraising Report
ROBUST ADVERTISING SPENDUS economic momentum buoyed by the forthcoming 58th US Presidential elections, combined with the commercial and marketing frenzy generated by the Rio XXXI Summer Olympics, will – we anticipate – drive strong advertising spend and, in turn, continued marketing services M&A in 2016.
$$
12 Introduction
We make
YOUR FUTURESUCCESS OURBUSINESS
The Importance of Being Content 13
- Introduction- The Importance of Being Content- A Review of M&A Activity- Appendix
AGENDA
14 The Importance of Being Content
THE IMPORTANCE OF BEING CONTENT
GLOBAL CONTENT MARKETING SPEND* (2009 TO 2019)
Content Marketing is an approach focused on creating and distributing valuable, relevant, and consistent content to attract and retain a clearly-defined audience… ultimately, to drive profitable customer action.1
Global spend on Content Marketing is forecast to more than double from US$144 billion in 2014 to over US$300 billion by 2019.2
Traditional digital advertising has become wallpaper. It doesn’t improve anyone’s experience on a site and readers, [myself included], pretty much look past it...
Jason HillFormer Global Head of Media Strategy, General Electric
0
$100
$200
$300
$400
US$
Billi
ons
2009 2019201820172016201520142013201220112010
$87
$144
$313
Source: PQ Media*Includes amount brands spend in-house & on contractors for Content Marketing
US$144BN
US$313BN
Global spend on Content Marketing is forecast to more than double from
in 2014 to over
by 2019
1 As defined by the Content Marketing Institute2 PQ Media Global Content Marketing Forecast 2015-19
The Importance of Being Content 15
The USP (unique selling proposition) of Content Marketing is the intrinsic value and relevance of the material, designed to build trust, engender loyalty and drive engagement. Relevant and quality content is in turn rewarded by Google in improved search results, meaning that there is not just the demand for it, there is a requirement to have it for brands to succeed online.
BRANDS AND AGENCIES ARE THINKING AND ACTING INCREASINGLY LIKE PUBLISHERS
The ability of effective Content Marketing to deliver game changing ROI is driving a surge in allocation of advertising spend – across all formats. Native advertising, a tactic where ads blend into the editorial content that surrounds them, is experiencing electric growth, with eMarketer forecasting spend to increase from US$4.3 billion in 2014 to US$8.8 billion by 2018.
Brands and agencies are thinking and acting increasingly like publishers. In parallel, digital-only publishers like Gawker and Refinery29, as well as traditional publishers like the New York Times and the Daily Mail, are building teams to work with advertisers to create content on their platforms that audiences want and that also drive ROI. This was one of the key forces behind the WPP/Buzzfeed strategic partnership announced in 2015 (providing clients “unprecedented” access to digital news in return for Group M’s minimum ad-spend commitment).
With so much content to create and noise to cut through, brands are increasingly turning to more subtle formats, such as native advertising, as well as technology to help them create, disseminate and measure the effectiveness of content with their audiences.
US$4.3BNUS$8.8BN
Native advertising, a tactic where ads blend into the editorial content that surrounds them, is experiencing electric growth, with eMarketer forecasting spend to increase from
in 2014 to
by 2018
16 The Importance of Being Content
THREE TRENDS THAT WILL IMPACT THE CONTENT MARKETING INDUSTRY IN 2016
1The Importance of Being Content 17
TECHNOLOGYDRIVING INNOVATION IN CONTENT CREATION AND AMPLIFICATION
With the influx of advertising spend into Content Marketing channels, the technology and services ecosystem is quickly adapting, to develop new ways to create, disseminate and measure content consistently and effectively on a global basis.
Creating bespoke and relevant content – at scale – or commoditizing the creation process, is the marketers’ Holy Grail. Players like Trigger Buzz and Zerys provide platforms that connect marketers with creative and journalist communities worldwide to help brands produce content faster and cheaper. Though early days, companies like Zazzle are trying to go further by automating the content creation process altogether.
Content Marketing Platforms have emerged to help marketers collaborate on strategy and produce, approve, plan, distribute and measure content to deliver a more consistent brand message globally. There has been a surge in the use of platforms provided by the likes of Percolate, NewsCred and Skyword, as well as those offered by marketing cloud giants like Oracle.
Recognizing that technology is playing an increasingly central role in Content Marketing, the VC community has increased its investment activity in the space. Over the past 24 months, NewsCred and Percolate raised US$70 million and US$65 million, respectively, while content discovery platforms Taboola and Outbrain raised US$120 million and US$50 million, respectively, in 2015 alone.
RECOGNIZING THAT TECHNOLOGY IS PLAYING AN INCREASINGLY CENTRAL ROLE IN CONTENT MARKETING, THE VC COMMUNITY HAS INCREASED ITS INVESTMENT ACTIVITY IN THE SPACE
SO WHAT? We anticipate that M&A activity in Content Marketing and Marketing Automation related technology will increase in 2016. We expect the larger global advertising and marketing technology players, like Adobe and Google, to continue to stitch together end-to-end solutions for their clients, with the more aggressively growing independents, such as JEGI Clarity client, Selligent, looking to stake a claim at the top table.
218 The Importance of Being Content
DATAOPTIMIZING PERFORMANCE OF CONTENT MARKETING
As marketing budgets have shifted toward content strategy, marketers have had to think not only about the production and distribution of content, but also its measurement and effectiveness. With increased focus comes increased accountability, so while content is king, context is now everything.
In its most traditional guise “big data” analytics has been used to enable marketers to segment audiences more accurately, helping them further refine their message and drive demand for more and more customized content. Amplification and personalization will be key to maximizing value on each and every piece of content.
Companies like Keywee, which raised US$9 million in 2015, use algorithms to analyze content and determine which paid media sites will deliver the best engagement. Further, as Content Marketing Platforms increasingly centralize core marketing workflows, they will become key data repositories that marketers use across the enterprise.
To engage people who are empowered by technology, we need to tell them a very personal story, and address them specifically with a relevant message. So we need to listen to them. We need to heed the insights – the data – they send to us along their journey.
Maurice LevyCEO, Publicis
In 2015, we advised Jun Group, a leading mobile video and branded content advertising platform, on their US$28 million investment from Halyard Capital and Bridge Bank. The platform drives interactions with specific consumer segments, at scale, through the use of first-party data to deliver precise, customized targeting for video and branded content.
US$28M
In 2015, we advised Jun Group, a leading mobile video and branded content advertising platform, on their
investment from Halyard Capital and Bridge Bank
SO WHAT? 2016 will see an increase in investment by brands, agencies and publishers in their data assets and capabilities. Newspapers, such as The New York Times, are investing heavily in “data journalism” – analyzing data to uncover and tell stories. “Big data” consultants and analytics platforms, such as Aquila Insight in the UK, will also benefit, as clients continue to try to interpret the “data exhaust” to better inform commercial decisions.
3The Importance of Being Content 19
AD BLOCKINGSHAPING THE FUTURE OF (CONTENT) MARKETING
Ad blocking technology is empowering the consumer to thwart disruptive ads in a quest to improve their online experience. According to PageFair and Adobe’s 2015 Ad Blocking Report, the number of people using ad blocking software globally grew 41% to approximately 200 million active users for the year to June 2015. To many, this is online advertising’s “TiVo moment”, and the swell of consumer take-up suggests that 2016 will be the year that ad blocking goes mainstream, forcing the advertising industry to react.
Estimates of the impact and global cost of ad blocking vary greatly, from UBS predicting a US$1 billion loss to the advertising industry, to PageFair and Adobe estimating the figure at US$22 billion. Needless to say, online publishers, advertisers and agencies are anxiously watching the space with great interest.
Though most ad blocking to date has been via desktop browsers, the introduction of content-blocking features in Apple’s latest operating system (iOS9) is expected to lead to a material uptake of ad blocking technology on mobile devices. Mobile users are increasingly sensitive to certain advertising formats, due to a combination of perceived personal intrusion and the additional practical load time and bandwidth that ads, particularly video, consume.
It’s an ongoing battle. People don’t have to sit there and suffer things that are not of interest to them. It’s on us to improve the product. Some high-quality publishers are already requiring users to disable ad blockers to gain access to their content. We’ll see what happens in that battle. We’re addressing it by focusing on the work and the content.
John WrenCEO, Omnicom
SO WHAT? The proliferation of ad blocking will result in a period of introspection for the digital marketing ecosystem, pushing the industry to create a better user experience and provide more value to the audience. As such, Content Marketing will flourish, with low-end formats replaced by more sophisticated solutions, such as native, that work for publishers, advertisers and most importantly, the audience.
200M
According to PageFair and Adobe’s 2015 Ad Blocking Report, the number of people using ad blocking software globally grew 41% to approximately
active users for the year to June 2015
20 The Importance of Being Content
A strong track record of
TRUSTED
INSIGHTSAND QUALITYADVICE
A Review of M&A Activity 21
AGENDA
- Introduction- The Importance of Being Content- A Review of M&A Activity- Appendix
22 A Review of M&A Activity
GLOBAL MARKETING SERVICES NETWORK M&A ACTIVITY REMAINED STRONG IN 2015
Jan
Feb
Mar Ap
rM
ay Jun Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar Ap
rM
ay Jun Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar Ap
rM
ay Jun Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar Ap
rM
ay Jun Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar Ap
rM
ay Jun Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar Ap
rM
ay Jun Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar Ap
rM
ay Jun Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar Ap
rM
ay Jun Jul
Aug
Sep
Oct
Nov
Dec
90 transactions
2008
27 transactions
2009
54 transactions
2010
98 transactions
2011
127 transactions
2012
115 transactions
2013
132 transactions
2014
116 transactions
2015
8
17
4
6
9 9
10
5 5
9
4 4
5
4
1
2
1
2 2 2
3
4
1
3
2
4
2
1
5
6 6
8
5
12
8
11
6 66
8
11
6
5
11
12
8
6
17
9
8
14
13
16
12
3
7
8
14
4
13
5
10
6
11
8
13
11
13
8
13
9
10 10
13
7
9
12
7
25
10
5
15
7
8
9
10
9
13
10
6
12
8
1212
A total of 116 deals completed in 2015 with 52% of these being completed in the second half of the year.
Source: Mergermarket, Capital IQ and Clarity research as at 31 December 2015
Number of transactions announced by the Global Marketing Services Networks (01/01/2008 – 12/31/2015)
A Review of M&A Activity 23
WPP CONTINUES TO DOMINATE M&A ACTIVITY BY VOLUME, COMPLETING 38% OF THE DEALS IN 2015, WITH DENTSU TAKING OVER FROM PUBLICIS AS THE SECOND MOST ACTIVE NETWORK
WPP has consistently remained the busiest Global Network by volume of acquisitions over the last eight years, completing nearly double the number of transactions as compared to the next most active, Publicis, in that time.
In 2015, Dentsu was the second most active Global Network acquirer, overtaking Publicis as the French global giant reduced their focus on M&A, preferring to concentrate on organic growth and on integrating Sapient.
Number of transactions announced by Network (01/01/2008 – 12/31/2015)
IPGPublicis
27
22
25
22
23
137
11
150
Dentsu
27
16
26
17
17
22
134
Omnicom
109
1013
1213
12
83
79
1298
52
Havas
68
11
3
544
5
41
WPP
44
64
51
299
45
32
17
34
12
20122011201020092008
344
4
2014 20152013
Source: Mergermarket, Capital IQ and Clarity research as at 31 December 2015
24 A Review of M&A Activity
WPP LED THE FIELD IN TERMS OF M&A EXPENDITURE IN 2014
WPP Dentsu Publicis Omnicom IPG Havas
884
1,004
364
5,726
341
3,298
204
370
168154
4,540
635
1,046
513
1,027
414
232
252
4,119
193
197
228
158
462
445
1,795
135186
779
289
857
369
305
1,943
109
91
112
669
2649
46
453419
2012A 2013A 2014A2011A2010A2009A2008A
78
85
94
Net cash expenditure on acquisitions by Global Network (inc. payment on earn outs, US$m)1
In 2014, total cash expenditure on new acquisitions and investments, including earn out payments, was US$2.2bn.
Unlike prior years, which saw multi-hundred million dollar transactions, the largest transaction completed in 2014 was Publicis’ acquisition of Nurun for US$94m.
Publicis’ acquisition spend of US$635m in 2014 does not include their US$3.7bn acquisition of Sapient, which while announced in November 2014, did not complete until February 2015.
Source: Annual Reports and SEC 10K FilingsNote: Analysis derived from latest published Annual Reports with full year 2015 data not available at the time of printing1 Includes all acquisition related cash payments including new acquisitions, investments and deferred payments paid in the year (where information is available) Numbers converted into USD based on annual average currency exchange rate from Capital IQ
A Review of M&A Activity 25
2008 2009 2010 2011 2012 2014 20152013
30.0%
10.0%
3.7%
7.4%
3.7%
14.8%
7.4%
3.7%3.7%
22.2%
33.3%
3.7%
9.3%
5.6%
7.4%
20.4%
5.6%
18.5%
14.8%
3.7%
3.7%
7.4%
7.1%
5.1%
9.2%
7.1%
3.1%5.1%
22.4%
14.3%
16.3%
15.0%
14.2%
3.1%
4.7%
4.7%
6.3%
13.0%10.2%
6.3%
10.2%
4.7%6.1%
20.5%
7.8%
22.6%
4.4%
11.1%
6.7%
3.3%
7.8%
4.4%
18.9%22.4%
7.6%
12.9%13.6%
18.1%
23.5%
7.8%
9.5%
22.0%
6.9%
6.9%
4.5%3.8%
7.8%
5.3%
2.6%
4.3%
3.8%
9.8%
4.5%
13.9%
4.3%
19.1%
9.6%
5.2%
4.1%
RoW
GermanyFrance
BrazilCEE and Russia Other Western Europe1
North America
ChinaIndia
AustralasiaUK
Total Deals
1.1%
2.2%
0.9% 1.5%
1.7%0.9%
1.7%
90 27 54 98 115 132 116127
Number of transactions announced by territory (01/01/2008 – 12/31/2015)
Source: Mergermarket, Capital IQ and Clarity research as at 31 December 20151 Includes Nordics
THE UK AND NORTH AMERICA CONTINUE TO LEAD IN TERMS OF LOCATION OF THE TARGETS, WITH AUSTRALASIA, FRANCE AND GERMANY EACH SEEING INCREASES IN ACTIVITY VS. 2014
Collectively the UK, North America, Australasia, France and Germany accounted for 55% of M&A activity in terms of the location of acquisition targets.
NUMBER OF DEALS 2014 2015
APAC 21 31
Europe 49 49
Americas 45 31
Africa 17 5
26 A Review of M&A Activity
2008 2009 2010 2011 2012 2014 20152013
11.1%
7.8%
33.3%
7.4%
14.8%
44.4%
7.4%
27.8%
35.2%
13.0%
14.8%
37.0%35.7%
6.1%
16.3%
31.6%
3.1%
7.1% 7.0%
8.7%
6.1%
7.0%
49.6%
21.7%
11.1%
40.0%
27.8% 27.3%
34.5%
7.8%
3.4%
6.9%
37.1%
10.3%9.1%
6.8%
5.3%
46.2%
5.3%
5.5%
3.9%
43.3%
3.1%
7.1%
Agency Serivces1 Digital2 Media Planning & Buying3 PR Research Technology Total Deals
2.2%
1.9%
90 27 54 98 115 132 116127
Number of transactions announced by sector (01/01/2008 – 12/31/2015)
Technology, Content and Data have been, and will continue to be, key areas of focus, as the likes of Dentsu acquired retail technology and services provider, eCommera, and WPP invested in content and technology publisher, Refinery29, as well as Comscore, a data and analytics business.
The reduction in Digital transactions in 2015 is likely a blurring of the lines between what is considered “Digital” vs. “Agency Services”, as the two combined are on par with previous years’ levels.
1 Defined as marketing services, creative, branding, field marketing, direct marketing and OOH advertising2 Defined as predominantly digital marketing services, including, social media, search, mobile, programmatic, web design and UX 3 Defined as predominantly non-digital media planning and buying
GLOBAL NETWORK M&A ACTIVITY IN 2015 CONTINUED TO FOCUS ON INTEGRATING NEW TECHNOLOGY, CHANNEL AND FORMAT CAPABILITIES
Source: Mergermarket, Capital IQ and Clarity research as at 31 December 2015
A Review of M&A Activity 27
ORGANIC GROWTH WAS A KEY DRIVER OF REVENUES IN 2014, WITH THE GLOBAL NETWORKS DELIVERING AN AVERAGE OF 5% ORGANIC GROWTH, UP FROM 3% IN 2013
Source: Annual Reports and SEC 10K Filings Note: Dentsu does not report growth figures excluding acquisitions and foreign exchange impact before FY2014 Analysis derived from latest published Annual Reports with full year 2015 data not available at the time of printing WPP organic growth for 2014 based on Revenue vs. Net Sales
CONTRIBUTION TO TOTAL INCREASE IN REVENUES (2008-2014)
Havas IPG Omnicom Publicis WPP
2008A revenue (rebased) 100.0 100.0 100.0 100.0 100.0
+ Organic 10.0 10.0 16.9 18.5 25.5
+ Foreign Exchange 1.3 (5.3) (5.0) 3.0 (0.2)
+ M&A 7.0 3.5 2.8 32.7 28.8
2014A revenue 118.3 108.2 114.7 154.2 154.1
CONTRIBUTION TO TOTAL INCREASE IN REVENUES (2013-2014)
Havas IPG Omnicom Publicis WPP
2013A revenue (rebased) 100.0 100.0 100.0 100.0 100.0
+ Organic 5.1 5.5 5.7 2.0 8.2
+ Foreign Exchange (0.6) (1.1) (0.8) (1.2) (6.7)
+ M&A 0.8 1.3 0.1 3.5 3.1
2014A revenue 105.3 105.7 105.0 104.3 104.6
28 A Review of M&A Activity
In perfect alignment with
MARKETS,CLIENTSAND BUYERS
Appendix 29
- Introduction- The Importance of Being Content- A Review of M&A Activity- Appendix
AGENDA
30 Appendix
WPP REMAINS THE LARGEST OF THE GLOBAL NETWORKS
02468
10121416
$bn
Dentsu Omnicom WPP1IPGHavas
$6.6bn
$2.3bn
$7.6bn
$15.2bn
Publicis
$10.3bn
$15.5bn
0
1
2
3
4
0%
5%
10%
15%
20%
25%
$bn
Dentsu PublicisOmnicom WPP1IPGHavas
21.3%
16.6%13.6% 14.6%
17.5%
$1.4bn$0.4bn
$1.0bn $1.8bn$2.2bn $3.0bn
19.1%
0
2
4
6
$bn
0
0.5x
1.0x
1.5x
2.0x
0.7x 0.8x
1.4x1.7x
$1.0bn0.4x
$0.1bn$0.9bn
$3.2bn $3.2bn $5.3bn
1.7x
Dentsu Omnicom Publicis WPPIPGHavas
Revenue Dec 2015E ($bn)
EBITDA Dec 2015E ($bn) and margin (%)
Net Debt ($bn) and Net Debt / 2015E EBITDA (x)
Source: Capital IQ and Clarity research as at 31 December 2015Note: Financials are converted to USD using historical spot foreign exchange rate. Dentsu’s financials are calendarised to December year end1 WPP’s Net Sales
Appendix 31
IN TERMS OF ABSOLUTE REVENUES, OMNICOM HAS A LEADING POSITION IN NORTH AMERICA WHILE WPP DOMINATES IN EUROPE
1 FY2015 Annual Report4 FY2014 Annual Report
Note: Numbers converted into USD based on annual average exchange rate for 2014 from Capital IQ
2 FY2014 Annual Report 5 FY2014 SEC 10K Filing
3 FY2014 SEC 10K Filing6 FY2014 Annual Report (Asia Pacific within ROW)
Japan49%
Asia Pacific14%
EMEA20%
The Americas17%
NorthAmerica48%
Asia Pacific12%
ROW9%
Europe31%
NorthAmerica32%
Asia Pacific8%
ROW9%
WesternEurope51%
NorthAmerica57%
Asia Pacific10%
ROW5%
Europe28%
NorthAmerica56%
Asia Pacific12%
ROW12%
WesternEurope20%
NorthAmerica35%
ROW30%
WesternEurope35%
Dentsu (Gross Profit of $6.4bn)1
Publicis (Revenue of $9.6bn)4
Havas (Revenue of $2.5bn)2
Omnicom (Revenue of $15.3bn)5
Interpublic Group (Revenue of $7.5bn)3
WPP (Net Sales of $16.6bn)6
32 Appendix
IN 2015, HAVAS JOINED IPG AND OMNICOM IN NO LONGER FORMALLY ACKNOWLEDGING THE DISTINCTION BETWEEN DIGITAL AND NON-DIGITAL REVENUE. WE EXPECT THE OTHERS WILL FOLLOW SUIT
1 FY2015 Annual Report2 FY2014 Annual Report 3 FY2014 Annual Report
Digital30%
Non-digital70%
Do not publish data
Do not publish data
Do not publish data
Digital42%
Non-digital58%
Digital36%
Non-digital64%
Dentsu1
Dentsu Aegis Network
Havas Interpublic Group
Publicis 2 Omnicom WPP 3
Digital is everywhere [...] everybody is digitally competent fully bilingual in the digital space.
Yannick BolloréHavas
Digital is in everything we do [...] It’s just marketing and noise to distinguish digital.
John WrenOmnicom
This is the last year that we will publish the split between digital and non-digital revenue for each of the Global Networks.
57%
43%
Appendix 33
THE NETWORKS ARE FORECAST TO DELIVER COMPOUND ANNUAL ORGANIC GROWTH OF 5% FROM 2015 TO 2017 VS. 3% IN THE PERIOD FROM 2008 TO 2014
Organic revenue growth (rebased to 100)
Source: Annual Reports, SEC 10K Filings and Research ReportsNote: Dentsu does not report growth figures excluding acquisitions/forex changes for period before FY2014. Numbers converted to USD based on annual average exchange rate for 2008 from Capital IQ1 Estimates based on Clarity calculations and research reports
85
95
105
115
125
135
145
155
2008A1 2009A1 2010A1 2011A1 2012A1 2013A1 2015F1 2016F1 2017F12014A1
133 WPP (net sales)
134 Publicis
152 WPP
130 Omnicom
126 Havas125 IPG
WPPPublicisOmnicomIPGHavas WPP (net sales)
34 Appendix
THE NETWORKS’ ORGANIC GROWTH IS FORECAST TO TREND TOWARDS BROADER GLOBAL GDP GROWTH OUT TO 2017
3.2%
6.4%5.7%
4.2%
2.9% 3.3%
5.9%
3.4%4.2%4.6%
3.6%3.1%4.1% 3.8%3.4% 3.1%
5.4%
3.1%
(8.4%)
0.0%2008A
2009A
2010A 2011A 2012A 2013A 2014A 2016E 2017E2015E
7.0% 3.8% 3.5% 3.5% 3.9% 4.7% 4.3%5.1%
Advertising expenditure growth (%)IMF Global GDP (%)Weighted average of Global Networks' organic growth (%)
Year-on-year organic growth (2008A – 2017E)
Organic growth across the Global Networks of 2–8% through the period 2014 to 2017.
Organic growth at the Global Networks is expected to be marginally lower than forecast growth in advertising expenditure in 2016 and 2017.
Source: Annual Reports, SEC 10K Filings and Research Reports. GDP: IMF as at September 2015 Advertising expenditure: Zenith Optimedia as at December 2015Note: Dentsu does not report growth figures excluding acquisitions and foreign exchange impact before FY2014
Appendix 35
0x
2x
4x
6x
8x
10x
12x
2008A 2009A 2010A 2011A 2012A 2013A 2015E2014A
10.5x10.8x
8.1x 8.6x
6.8x7.8x
11.3x
5.2x
TRADING MULTIPLES FOR THE GLOBAL NETWORKS REMAIN CLOSE TO THEIR EIGHT YEAR HIGH
Average EV/ EBITDA multiples over time
Source: Capital IQ and Clarity research as at 31 December 2015
2008A 2009A 2010A 2011A 2012A 2013A 2014A 2015E
Dentsu 6.3x 9.9x 8.6x 6.8x 6.8x 15.1x 11.7x 12.2x
Havas 4.7x 6.5x 8.2x 5.9x 8.2x 10.3x 11.3x 9.5x
IPG 3.8x 7.3x 7.0x 6.3x 7.1x 10.1x 10.9x 10.2x
Omnicom 5.5x 8.0x 9.3x 7.4x 7.6x 10.5x 10.2x 10.0x
Publicis 4.9x 7.5x 8.9x 7.0x 8.6x 10.4x 9.9x 9.5x
WPP 6.1x 8.5x 9.7x 7.7x 8.6x 11.3x 11.0x 11.9x
36 Appendix
DETAILED TRADING COMPARABLE DATA OF THE MAJOR HOLDING COMPANIES
COMPANY
MARKET VALUE
ENTERPRISE VALUE
NET DEBT 1
NET DEBT/EV
REVENUE DEC-15
EBITDA DEC-15
EBIT DEC-15 EV/ REVENUE EV/ EBITDA EV/ EBIT REVENUE
CAGR EBITDA CAGR
EBIT CAGR
$M $M $M % $M $M $M DEC-15E DEC-16E DEC-17E DEC-15E DEC-16E DEC-17E DEC-15E DEC-16E DEC-17EDEC-15
– DEC-17DEC-15 – DEC-17
DEC-15 – DEC-17
DENTSU 15,846 17,083 990 5.8% 6,586 1,406 1,252 2.6x 2.4x 2.2x 12.2x 11.1x 10.3x 13.6x 12.4x 11.6x 7.6% 8.4% 8.4%
HAVAS 3,517 3,676 147 4.0% 2,345 389 332 1.6x 1.5x 1.4x 9.5x 8.7x 8.3x 11.1x 10.2x 9.7x 4.8% 6.5% 6.8%
IPG 9,460 10,584 870 8.2% 7,609 1,037 876 1.4x 1.3x 1.3x 10.2x 9.6x 8.7x 12.1x 11.1x 10.1x 4.2% 8.0% 9.5%
OMNICOM 18,329 22,134 3,201 14.5% 15,166 2,218 1,924 1.5x 1.4x 1.3x 10.0x 9.6x 9.1x 11.5x 11.0x 10.5x 4.1% 4.5% 4.8%
PUBLICIS 13,877 17,055 3,227 18.9% 10,308 1,801 1,561 1.7x 1.6x 1.5x 9.5x 8.8x 8.3x 10.9x 10.2x 9.5x 4.5% 6.7% 7.1%
WPP2 29,843 35,331 5,318 15.1% 15,529 2,959 2,613 2.3x 2.2x 2.1x 11.9x 11.3x 10.7x 13.5x 12.8x 12.0x 4.7% 5.7% 6.0%
MIN 3,517 3,676 147 4.0% 2,345 389 332 1.4x 1.3x 1.3x 9.5x 8.7x 8.3x 10.9x 10.2x 9.5x 4.1% 4.5% 4.8%
MEAN 15,145 17,644 2,292 11.1% 9,591 1,635 1,426 1.8x 1.7x 1.6x 10.5x 9.9x 9.3x 12.1x 11.3x 10.6x 5.0% 6.6% 7.1%
MEDIAN 14,862 17,069 2,096 11.3% 8,959 1,604 1,407 1.6x 1.5x 1.5x 10.1x 9.6x 8.9x 11.8x 11.1x 10.3x 4.6% 6.6% 7.0%
MAX 29,843 35,331 5,318 18.9% 15,529 2,959 2,613 2.6x 2.4x 2.2x 12.2x 11.3x 10.7x 13.6x 12.8x 12.0x 7.6% 8.4% 9.5%
Source: Capital IQ and Clarity research as at 31 December 2015Note: Financials are converted to USD using historical spot foreign exchange rate1 Net Debt as per latest Filings 2 WPP’s Revenue relates to Net Sales
Appendix 37
WE HAVE AN EXCEPTIONAL TRACK RECORD OF COMPLETING TRANSACTIONS ACROSS THE MARKETING SERVICES LANDSCAPE
Nielsen’s National Research Group (NRG) provides research and analytics to the entertainment industry.
Allant Group is a leader in data and analytic driven marketing and advertising services.
Selligent is an international marketing automation SaaS platform delivering omnichannel audience communications.
HAS BEEN SOLD TO
STAGWELLGROUPTHE
HAS SOLD
TO
A PORTFOLIO COMPANY OF
HAS SOLD ITSADVANCED-ADVERTISING UNIT
TO
Opus is a global corporate events and experiential marketing agency.
McMurry/TMG is the leader in omnichannel content creation and delivery. Manifest is a leader in digital experience design.
Jun Group is a leading mobile video and branded content advertising platform.
NavigationArts is a digital strategy and experience design firm.
Briefing Media is the leading provider of business information and marketing solutions to the UK agricultural sector.
HAS SOLD
TO
HAS RECEIVED A SIGNIFICANT
INVESTMENT FROM
A PORTFOLIO COMPANY OF
HAS MERGED WITH
HAS RECEIVED A SIGNIFICANT
INVESTMENT FROM
HAS BEEN SOLD TO
inVNT is an experiential marketing company specializing in live media, advertising, brand environments and creative services.
3Q Digital is a leading provider of digital marketing and online customer growth services.
Indicia is a leading data analytics and customer engagement agency.
Promedica is a leading market research firm serving pharmaceutical and biotechnology companies.
Investis is the leading independent global provider of digital corporate communications solutions.
HAS SOLD
TO
HAS BEEN SOLD TO
HAS BEEN SOLD TO
Splendid is an award-winning user experience design and technology consultancy.
HAS SOLD A 51% STAKE TO
HAS ACQUIRED
HAS BEEN SOLD TO
MarketCast is a leading provider of entertainment marketing insights and analytics.
A PORTFOLIO COMPANY OF
HAS BEEN SOLD TO
Travel Planners and onPeak are leading event housing software and services providers.
Big Fuel is a leading social media and creative agency.
A UNIT OF
HAS BEEN SOLD TO
F R O M C O N T E N T T O C O M M E R C E ™
www .b i g f u e l . c om
82, bd des Batignolles - 75017 Paris - FRANCETél. : +33 (0)1 53 42 35 35 / Fax : +33 (0)1 42 94 06 78Web : www.carrenoir.com
PUBLICIS GROUPEPUB_09_XXXX_Vivaki_Logo29/01/2009
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Illustrator version CS2.
RKG is a leading tech-enabled search and digital marketing agency.
Distimo is a leading mobile app market intelligence and analytics provider.
Pepper is an international integrated communications agency.
HAS SOLD
TO
Salterbaxter is a leading international sustainability strategy and communications consultancy.
HAS BEEN SOLD TO
A SUBSIDIARY OF
HAVE BEEN SOLD TO
&
HAS BEEN SOLD TO
HAS BEEN SOLD TO
38 Appendix
WE HAVE AN EXCEPTIONAL TRACK RECORD OF COMPLETING TRANSACTIONS ACROSS THE MARKETING SERVICES LANDSCAPE (CONTINUED)
Epiphany is an award-winning, independent search marketing agency.
BGT is a leading digital agency and creative consultancy.
Walker Media is a leading UK media agency.
Competitrack is a full service competitive advertising tracking firm.
Group SJR is a leading digital consultancy specializing in insights, content creation, curation, and audience development.
MyWebGrocer is a leading provider of shopping and shopper marketing software and services.
WMI is the leader in media strategy, planning and buying for emerging brands targeting women.
HAS BEEN SOLD TO
Tmg Custom Media is a full service Content Marketing firm.
HAS BEEN SOLD TO
ePrize is a leader in digital engagement, specializing in promotions and loyalty campaigns.
Conversen is a SaaS marketingplatform (CRM) for real-time,multi-stage, and multi-channelmarketing.
adam&eve is a leading creative advertising agency.
Experient is a leading provider of integrated event solutions.
The Retail Equation is the leading SaaS platform for retail transaction optimization solutions.
Empower is a leading provider of social media insights via search, monitoring and measurement.
AdJug is Europe’s leading display advertising exchange for unsold premium inventory.
HAS BEEN SOLD TO
HAS BEEN SOLD TO
A SUBSIDIARY OF
HAS BEEN SOLD TO A PORTFOLIO COMPANY OF
THE RIVERSIDE COMPANY & VS&A COMM PARTNERS FUND II
HAS BEEN SOLD TO
HAS BEEN SOLD TO HAS BEEN
SOLD TO
A UNIT OF
HAS BEEN SOLD TO
Empathy Lab is a digital strategy and experience design firm delivering e-commerce and broadband video solutions.
MRSI is a leading market research firm primarily focused on consumer-oriented research.
McMurry is a leading full service Content Marketing firm.
Morningstar’s Investor Relations Services (formerly Hemscott IR) is a leading provider of online investor relations and digital communications solutions.
Adam Matthew is an award-winning creator of online resources for university research.
I Spy is an award-winning digital marketing agency.
A PORTFOLIO COMPANY OF
HAS BEEN SOLD TO
HAS SOLD
TO
HAS BEEN SOLD TO
HAS ACQUIRED
FROM
MORNINGSTAR’S INVESTOR RELATIONS
SERVICES
HAS BEEN SOLD TO
A SUBSIDIARY OF
HAS BEEN SOLD TO
HAS BEEN SOLD TO
HAS SOLD A 75.1% STAKE IN
TO
A PORTFOLIO COMPANY OF
HAS BEEN SOLD TO A PORTFOLIO COMPANY OF
HAS BEEN SOLD TO
A SUBSIDIARY OF
HAS BEEN SOLD TO
HAS RECEIVED A SIGNIFICANT
INVESTMENT FROM
LONDON90 Long Acre London WC2E 9RA +44 20 3402 4900 | www.claritycp.com
NEW YORK 150 East 52nd Street18th FloorNew York, NY 10022 +1 212 754 0710 | www.jegi.com
BOSTON CIC Boston, 50 Milk Street16th FloorBoston, MA 02109+1 617 294 6555 | www.jegi.com
