TBWA plans up to six acquisitions
by Herman Manson (@marklives) TBWA is looking at as many as six more acquisitions spread out over the next four quarters. This is according to Derek Bouwer, CEO at TBWA\South Africa.
At the end of 2013, TBWA acquired 80% stake in youth marketing agency, HDI Youth Marketeers, as well as increasing its stake in marketing agency, Openco, to 51% from a previous holding of 30%.
The Omnicom-owned group, says Bouwer, is taking a different approach from rivals WPP and Publicis in its acquisition strategy.
WPP is obviously focused on expanding its emerging market and digital footprint, and Bouwer has been especially impressed by its deal with Scan Group in Kenya, which he admits stole the march on rival networks.
Within the past year, the British multinational advertising and PR company also bought into Cerebra and Native; WPP operating company JWT acquired a majority stake in Durban-based The Hardy Boys; WPP announced that its wholly-owned operating company Grey had acquired a majority stake in The Volcano Group; and it also took a controlling stake in Quirk.
Reinvigorating global brands
The Publicis Groupe (head-quartered in Paris, France), meanwhile, seems focused on reinvigorating its global brands in the South African market. “It looks a lot like a salvage job,” comments Bouwer.
Within the past few months, Publicis acquired BrandsRock (merged with Saatchi & Saatchi to form Saatchi & Saatchi Brandsrock), OwenKessel (merged with Leo Burnett) and digital agency Lighthouse Digital (which became part of Publicis division, Starcom MediaVest Group). Digitas LBi, part of Publicis Groupe, also acquired SA digital agency Liquorice.
TBWA has less capacity to cope with the kind of volume of deals flowing out of Publicis and WPP. According to Bouwer, the group drives acquisitions locally, rather than using global M&A teams, as this assists with the final integration process. It’s looking at building out the breadth of capabilities and extending its footprint along the marketing value chain.
Bouwer’s intentions are to to build a business active across multiple sectors in the industry, and drive collaboration between the owned agencies.
The HDI Youth Marketeers acquisition has filled a gap in TBWA’s business and contributes to the broader group in a critical vertical: a large proportion of the market in Africa is younger than 25, and HDI helps open this market to TBWA. The Openco acquisition assists in managing client conflict and brings with it a strong retail client base.
Bouwer says the group is very selective in its acquisition targets. Contenders are generally the no. 1 or no. 2 players in their sector, giving the group immediate visibility. They need to add to the TBWA offering and be willing to collaborate with group members.
Expand geographic footprint
Future acquisitions will focus on expanding the group’s geographic footprint — converting its African affiliate network into an equity network is a priority for Bouwer. Nigeria and Kenya are the starting points to building West and East African networks, while Ghana, Angola and Mozambique are also priority markets.
Digital agencies remains of interest, and TBWA is especially interested in acquiring content-marketing businesses to enhance its ability to provide digital content fast and cost-effectively.
Group revenue has been growing by double digits for the past 6-7 years, says Bouwer, and around 700 staff members are currently employed. Profit growth is lagging revenue growth as clients demand more for less, and an expanded offering should also relieve this squeezing of margins.
Ultimately, the group is buying quality that fits into the collaborative culture the group is fostering. TBWA is looking to expand its capabilities, says Bouwer, rather than chase scale through its acquisition strategy.
The first of the new acquisitions should be announced before the end of Q3 2014, if all goes well, with two more set to be announced in Q4 2014. The rest will be spread out over Q1 and Q2 2015.
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