• Five big things: Trends defining media & marketing services M&A

Five big things: Trends defining media & marketing services M&A

13 March 2019

BDO UK Corporate Finance teams have advised on more than 40 media & marketing services deals in the last two years and our 2018 deals highlight a sector that is evolving and adapting to the biggest structural change in a generation. Our specialist team discusses trends driving deals in the media & marketing services sector.

Key drivers in media & marketing services M&A

The agency moves inside the client: in 2018 in-housing of marketing services was a major theme. The main reasons for brands to take back control of services were transparency and trust (paid media), improving efficiency, and execution, including the protection of customer data (programmatic). Ultimately, there is no one size-fits-all solution and the agency’s role will evolve, providing services to clients that they cannot do more efficiently themselves.

New consolidators: the convergence of consultancies and traditional ad agencies experienced further twists and turns in 2018, however the biggest news was Sir Martin Sorrell taking the helm at Derriston Capital (S4 Capital). The introduction of S4 Capital provides an alternative exit route for entrepreneurs in the market; watch this space.

Continuing ad spend moving to digital: ad spend continues to move from traditional to digital platforms. IAB recently released data highlighting a 14% growth in digital ad spend, in 2017 compared to 2016. Ad spend is predominately in search, but the fastest growing areas are video and social on mobile platforms. Agencies are adopting their business models to have the right blend of creative and analytical skill sets.

Over the last two years we have seen a growing number of transactions in the live broadcast space. This reflects fragmentation in the live sporting events rights, demand for 2/3 tier sports, and a growing number of new players entering the market (in particular online media players such as Amazon, YouTube and Facebook). It will be interesting to see when the customer begins to lose out due to too much fragmentation.

The convergence of technology and people will make the sector increasingly attractive to private equity buyers as the business becomes less reliant on people and revenues more sticky and recurring in nature.

Notable companies and deals

Now that we know the trends driving M&A deals in media & marketing services sector, we can explore some of the recent, noteworthy transactions that we advised on in the sector. Here's a closer look at a few particular media & marketing services deals and how they relate to the trends we analysed above:

The agency moves inside the client

In 2018 BDO provided vendor due diligence to the shareholders of Inside Ideas (Oliver Group) as part of the investment by You & Mr Jones. We also provided buy side due diligence advice and acted as reporting accountant to S4 Capital on their acquisition of MightyHive Inc.

Neal Carter, Chief Financial Officer at Oliver, commented: “It was great to have BDO’s support. Derek and the team were responsive, opinionated and pragmatic. They brought in the right people at the right time and demonstrated that they understood both our sector and the inherent challenges of a fast growing and entrepreneurial business, and how best to present this to investors.”

New consolidators

BDO provided financial due diligence services and acted as reporting accountant to S4 Capital on both the MediaMonks and MightyHive Inc transactions.

Sir Martin Sorrell, Executive Chairman at S4 Capital, commented: “BDO engaged with S4 Capital and Peter Rademaker, our CFO and me, as advisors, showing strong dedication to complete the highly competitive mergers with MediaMonks and MightyHive, including supporting our successful listing and subsequent placings. They were very responsive and always willing to share constructive ideas and thoughts on the key issues, across multiple workstreams, providing quality focused outputs throughout the process alongside sector knowledge. We all enjoyed working with the team and look forward to developing the relationship in the future.”

Continuing ad spend moving to digital

BDO provided financial due diligence advice to S4 Capital on its acquisition of MediaMonks, ICF on its acquisition of We Are Vista, and Dentsu on its acquisition of Whitespace Scotland Limited.

Eric Hamman, Senior Vice President at ICF said: “BDO were really helpful partners throughout the deal process and we enjoyed working with them. They worked closely with us to prioritise our key areas of focus, and help us understand the nuances of the company financials. Conor, Lewis and the team gave us really good advice around the completion mechanism using their strong sector expertise. We look forward to working with BDO on our future acquisitions.”

A growing number of transactions in the live broadcast space

BDO provided vendor due diligence services to the shareholders of Alston Elliot Limited and SIS live Limited and financial due diligence support to Gravity Media Limited.

Ultimately, in 2019 there will continue to be opportunities and challenges in the media space including: continued investment in content, increased personalisation, introduction of 5G network, new technologies (AI and AR) and rationalisation of business models against the background of a potential economic slowdown / downturn, audience fragmentation and regulatory concerns.

We really enjoy working with entrepreneurial businesses who are leading their markets and bridging the gap between them and investors.

"Media & marketing services M&A has had a great couple of years; we have seen an exceptionally buoyant market, despite global and domestic political uncertainty. Corporates and private equity have looked to technology for growth and the continued demand for digitalisation has pushed businesses to acquire quality, innovative assets.

BDO's position as a specialist in the sector has resulted in a very active year for our Corporate Finance team, with many successful deals completed. Our clients continue to seek high quality advisory services to help differentiate themselves in a competitive and evolving industry.”
Derek Neil, Partner

About us

BDO Corporate Finance is a leading adviser with a focus on the media and marketing services sector.

Our team works with a range of ambitious public, owner managed and private equity backed businesses across a wide range of technology & media sub-sectors. Our specialists combine deep industry knowledge and technical experience to support businesses' growth journeys domestically and internationally, bringing together entrepreneurial passion and institutional rigour. 

As well as corporate finance, our team of sector specialists is integrated across accounting, audit, tax, and specialist areas of advisory, in the UK and across the globe, which means we are able to help our clients in many complementary areas throughout the transactions.

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