Breaking now: WPP buys NATIVE, joins agency to VML network

by Herman Manson (@marklives) Digital agency NATIVE, one of the last major independent digital agencies in South Africa, has been bought by WPP. VML, one of WPP’s digital marketing agencies and part of the Y&R network, has acquired 76% of NATIVE for an undisclosed amount. NATIVE will be rebranded NATIVE VML. Its current management team stays in place.

The deal has been more than a year in the making. It had the blessing of WPP CEO Sir Martin Sorrell who met with Yossi Schwartz, Group Chairman of Y&R South Africa, and NATIVE CEO Jason Xenopoulos over lunch about twelve months ago to discuss the possibility of a deal. According to Schwartz he has been working on bringing VML into the South African market since 2010.

WPP wanted a substantial deal that would see the VML brand launch with a significant client, management and skills base, which meant Schwartz had to look for a sizeable digital acquisition on the local digital agency front. Draftfcb had recently acquired another significant digital agency play – Hellocomputer, and WPP already owns Aqua, which is aligned with WPP agency Wunderman.

The four major digital agency brands in the WPP stable include Wunderman, AKQA, Ogilvy One and VML says Schwartz. Wunderman operates Aqua in South Africa, while Ogilvy Interactive is also active in the country.

On the reasons behind the deal Schwartz says the digital communication space has seen fast growth in South Africa and that it had become essential for Y&R to tap effectively into this space. Aqua also already has significant clients in virtually every category and a new agency in NATIVE VML would open business pitches closed to WPP as a result. Native also has multiple skill sets that covers most aspects of digital communication, something that made the agency a worthwhile target for acquisition, says Schwartz.

Schwartz intends to roll out NATIVE VML services across multiple African markets starting with Lagos and Nairobi before the end of 2013. The Y&R Africa network, which currently extends to 11 partnered agencies, is expected to expand to 20 by 2015, and NATIVE VML will be positioned to service their digital requirements, initially via South Africa. Xenopoulos says the agency plans to leverage client relationships and service infrastructure of partner agencies in these markets and establish physical presences as and when required.

According to Xenopoulos NATIVE management had always been clear about their objectives – to become a lead digital agency in South Africa, to roll out into other African markets and to become a world class agency working at connecting global brands with emerging market consumers. The VML deal sets the second two objectives on a fast track, says Xenopoulos. The deal also solves NATIVE’s lack of BEE credentials as the WPP empowerment Trust will hold a stake in the new business.

All the NATIVE directors are staying in the business and remain shareholders. They have been signed to a minimum of five years with the new agency.

According to JJ Schmuckler, Managing Director, Global Integration at VML, the NATIVE acquisition is the first foray of the network into Africa. It has been focussed on international expansion into emerging markets since 2011 and has offices in Sao Paulo, Mumbai and Jakarta. It recently opened a Central European hub in Poland. It also operates in Kansas City, Seattle, Chicago, New York, London, Milan, Sydney and Singapore.

Market speculation on a possible deal between WPP and NATIVE has been ongoing with Ventureburn reporting in September 2012 that a deal was close. At the time NATIVE MD Jarred Cinman was quoted as saying “I don’t know where you’re getting that information from, but it’s absolutely not true.”

According to Xenopoulos the agency had been in talks with multiple possible partners over the past year. “A deal is not done ’till a deal is done,” quips Xenopoulos.

Xenopoulos believes the global pedigree brought to NATIVE by the VML deal positions the agency to speed up growth and to differentiate it from rivals. He promises the deal will bring global methodologies to the local market.

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