The trend of independent agencies dominating the M&A landscape picked up in 2016 right where it left off in 2015.
For the second consecutive year independent PR agencies took up most of the M&A space, according to an annual analysis of PR industry deal activity by The Holmes Report.
The report, which was released late last year, covered 61 acquisitions in the public relations business globally last year— the same number The Holmes Report covered in the 2015 M&A report .
The majority of those deals, 36, or 59 percent, were executed by independent PR firms, up slightly from the 57 percent of deals made by independent firms in 2015, the report said.
Rick Gould, CPA, J.D., managing partner of Gould+Partners, which specializes in PR M&A, said he expects independent shops to continue to be active on the M&A front his year.
“Independent agencies realize that in such a fluid marketplace they have to step up and invest in firms that will increase profitability and boost their valuation and improve their utilization,” he said, adding that he is currently working on multiple PR M&A transactions both in the U.S. and abroad.
Gould added: “In light of the rapid and ongoing changes in the PR field, more and more firms realize it’s more cost effective to go out and buy the PR services they need to grow and excel, rather than to build them in-house.”
About 11 of the deals, or 18 percent, involved small or specialist holding companies, including Next Fifteen, which acquired digital media shop Pinnacle Marketing Communications and Publitek, a UK-based, technical B2B digital firm focused on content marketing.
W20 Group, Finn Partners and MMGY, among others, were also active buyers.
Global agencies were also acquiring. For example, Golin acquired ad agency Brooks Brothers for $18 million while Weber Shandwick acquired ReviveHealth for an undisclosed price.
”Whether it’s [PR] holding companies, midsize shops, boutique firms or global agencies, most all PR agencies are looking to acquire additional services—mostly digital—in order to provide their clients with one-stop shopping and build a better mousetrap,” Gould said. “Selling companies realize that they have to hitch their agency to a firm that can provide more ample resources in order for the selling company to thrive.”
International PR deals also seem to be on the upswing. The Holmes Report annual review pointed to several global transactions, including the acquisition of Sopexa, an international firm focused on the food, wine and lifestyle sectors and with offices in 28 countries, by French agency Hopscotch and WPP’s acquisition of Maquina in Brazil on behalf of Cohn & Wolfe.
National PR, one of the largest PR shops in Canada, acquired for an undisclosed price Boston-based SHIFT Communications. (Gould+Partners represented SHIFT in the transaction.)
“The appetite among foreign countries for U.S. PR firms, and vice versa, is seriously picking up,” Gould said. “It’s adding to the competition for PR assets and, for PR firms that are interested in selling, quite possibly spiking the multiples for potential deals of high quality, highly profitable firms.”
Rick Gould, CPA, J.D., managing partner of Gould+Partners, is the author of “The Ultimate PR Agency Financial Management Handbook: How to Manage By The Numbers for Breakthrough Profitability of 20% or Greater,” and “Doing It The Right Way: 13 Crucial Steps For A Successful PR Agency Merger Or Acquisition.”
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