Contact: Scott Denne
Ad agency holding company WPP looks poised to continue its two-year streak of digital advertising acquisitions, having printed its 19th deal in the past 12 months and its second so far this year by picking up Bannerconnect, a maker of optimization and visualization technology for real-time ad campaigns.
WPP announced purchases of 18 tech companies in 2013 and 20 in 2012, compared with 20 in the four years before 2012. The splurge comes as WPP added to its earlier target for digital revenue and now expects that portion of its business to generate 40-45% of its total sales within the next five years. Digital’s share of WPP’s overall revenue grows 1.5 percentage points a year, meaning that the company could only achieve the low end of the target at its current digital growth rate. Last year, digital accounted for 33% of its $16.5bn in revenue.
While WPP isn’t the only agency holding company getting more active on the digital front, it’s the most aggressive acquirer among its peers, according to an analysis of The 451 M&A KnowledgeBase. The only other agency holding company that comes close to matching WPP’s volume of tech transactions is Publicis Groupe, whose future as a tech acquirer is uncertain as it’s in the process of merging with Omnicom Group, which hasn’t announced a tech acquisition since July 2013.
Yearly tech deals by largest agency holding companies
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Source: The 451 M&A KnowledgeBase
WPP’s tech deals, for the most part, have been small. Bannerconnect generated $5.7m of revenue last year and plista, its other 2014 acquisition, is even smaller. Given its recently stated digital target and its reliance on M&A for growth (acquisitions were responsible for growing the business 3.3% through the first half of 2013, compared with 2.4% for organic growth), we expect WPP to continue or expand the pace of deals, especially in emerging markets where it has a similar 40-45% revenue goal, and explore larger digital deals that can impact its revenue.
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