New African holding company to challenge global networks
by Herman Manson (@marklives) Zibusiso Mkhwanazi and Veli Ngubane have rebranded their agency holding company to M&N Brands. This puts distance between their 80%-owned, fast-growing agency group, AVATAR360 Group (owners of AVATAR Johannesburg and Cape Town), and the new holding company, which was previously (and somewhat confusingly) known as AVATAR Investment Holdings (AIH).
SA and African agency network
The rebranded holding vehicle will be used to expand and build their South African and African agency network. The intention is to create a group with scale to take on global agency networks operating on the continent, such as Dentsu Aegis Network, Havas, Interpublic Group, Omnicom, Publicis and WPP.
M&N Brands is 100%-owned by Mkhwanazi and Ngubane (hence the “M&N” in “M&N Brands”). According to Mkhwanazi, the idea had always been to build an African holding business but that the project became more-urgent with the rise of network-only pitches. For example, last year MTN only invited global networks to pitch and the SA-born brand wouldn’t open its pitch to SA’s remaining independent agencies. M&N Brands intends to change this and also support SA brands expanding into other markets on the continent.
Apart from its investment in AVATAR360, Group M&N Brands also owns a minority stake in M&C Saatchi’s South African agency network. These two groups already employ close to 400 people between them. Growth into new markets will be driven by client needs; Avatar is already producing work for several markets for a London based client.
As many as five independent agencies
Mkhwanazi says M&N Brands is in discussion with as many as five independent agencies to join the network (it is at various stages of the negotiation process). The first investment announcement should follow by the end of July. Fundi Mbangi, previously with Yardstick, has been appointed group network director for M&N Brands. Mbangi’s role will be to facilitate collaboration between the new network’s agencies and to ensure that any collaboration is commercially viable for clients.
A solid performance at AVATAR360 Group is allowing M&N Brands to self finance initially, says Mkhwanazi, but it also has financiers lined up to fund upcoming deals. The new network offers a unique value proposition for SA’s independent agencies who need to adhere to the BBBEE target set out by the SA industry’s Marketing, Advertising and Communication (MAC) Charter (view the charter here for full details). M&N Brands will offer them continued SA ownership; assist with meeting BBBEE ownership and management targets; allow access to shared resources and a shared service offering; and even facilitate merger opportunities between network agencies.
M&N Brands will bring on board more owner-partners as it develops and grows, continues Mkhwanazi, making agencies partners, rather than simply acquisition targets, by creating sub-ownership structures across different businesses in the long term. He wants employees of new partner agencies to also become part of the group’s ownership structure, backed by M&N’s ability to raise capital, as some agencies are simply too big and expensive for such deals to be funded by employees by themselves. Not all deals will be cashed-based — some agencies are simply too big and expensive — but the value offering is certainly compelling.
Transformation should make good sense for your business
For agency owners, transformation shouldn’t be about giving part of their business away, or simply be about compliance; it should make good sense for the business. M&N Brands hopes to make it just that. It attempts to fill the gap for a South African-and African- (owned and managed) holding company, driven by transformation.
Agencies in the M&N Brands network will be encouraged to retain their own culture — the secret to their individual successes — a message the group will take to its partners elsewhere in Africa as well. Respecting local culture will be key to its operations inside and outside of SA.
Mkhwanazi says the network will be careful not too take on more than it can chew. It will also avoid the sometimes-underhanded way a certain network tends to yank away business from smaller agencies it owns to fit them with flagship properties.
Building agencies, people and entrepreneurs
Some agencies have, in the past, been acquired by networks simply because they were on the rise and posed a threat to existing established businesses, argues Mkhwanazi. The networks would then impose strenuous operating conditions, kill the agency culture and ultimately move its business elsewhere. There is simply no benefit in this scenario for local entrepreneurs. M&N Brands hopes to offer SA and Africa’s agency entrepreneurs a viable alternative to this scenario: one that will build agencies, their people and the entrepreneurs that started them.
Herman Manson (@marklives) is the founder and editor of MarkLives.com.