Buy or sell? How to be a mover and shaker in marketing M&A

Amid the ongoing Brexit uncertainty and economic turmoil facing the nation at the moment, marketing M&A is in rude health. A recent report has found that in the first half of this year, there have been 745 deals across the marketing services, adtech and martech sectors, all hot property for investors.

A significant proportion of these have been private equity backed deals, showing that independent investors are seeing lucrative potential returns in the space. The fact that the larger traditional holding companies in this space have been biding their time recently, even divesting some of their company assets rather than snapping up new properties has opened up the market for a wider suite of potential investors. So, how can companies shape up to seize these market opportunities – either to acquire complementary businesses and bolster their offerings, or to be acquired themselves.

We have advised on a number of deals in the creative industries space, including for a number of PR firms – a hot ticket given the interest of many at the moment in marketing for swift and reliable content provision services. While the sector has seen a lot of consolidation recently, appetites remain for focused businesses which can easily slot in or augment other service offerings without conflict of client base.

Certain business sectors are also more desirable than other at the moment, including AI and machine learning which are still in their infancy within sector applications but hotly tipped to transform the way that operations work in coming years. Data and digital transformation in their many forms are also attractive tickets, but that doesn’t mean that businesses outside of this space would be overlooked if they are on the lookout to be acquired. Good M&A partners and advisers will be able to connect potential business partners together – even if they are outside of the UK, given the current attractive exchange rates for UK sales.

Businesses on the journey to being acquired should also try as far as possible to get their paperwork house in order as quickly as possible. The M&A process can be a long and complicated one, involving a lot of company documentation from employee handbooks through to detailed HR policies. If a company has grown rapidly from start-up to scale up, these are just the kinds of document which can, naturally, have fallen by the wayside while the business grows at pace.

But understanding which documents are needed for the due diligence process in advance, and making sure everything is shipshape well in advance can save some blushes and pointed questions with speedy answers needed while the process is under way. Communicating confidence in the company at every stage of the deal is key to making sure the process goes without a hitch, and nothing rattles a potential investor or owner more than some of these business bedrock documents being in question.

As for those on the lookout for a great opportunity, research is key. The details on precisely what some businesses in this space actually do for clients can sometimes be hidden behind layers of jargon, which means specific things to people in the sector, but little to those on the outside. This can be especially true when it comes to ad- and martech offerings. Those on the acquisition trail typically do well not to rush the process unless the business in question is in high demand. Understanding how to integrate staff and cultures from two very different businesses can often be overlooked, and without proper planning can be a key trigger for those valued employees jumping ship for other opportunities, creating a major loss through a corporate brain drain.

With so much interest in the space, it also pays for both parties to give each other time to know who they are getting into bed with. Deal structures, especially when it come to the specific preferences of Private Equity investors who usually avoid earn out structures and seek to make their investments back over shorter period of time, should also be carefully considered.

However, time and again, M&A deals fall through not for a lack of paper due diligence, but a dearth of planning when it comes to combining two entities or even a robust enough understand of how that other business really works, on a day to day basis. The market in creative industries M&A may be heating up, but companies looking to engage on either side would do well to consider jumping into a fire just for the sake of a quick and painless deal.