The most recent deal has seen digital consultancy Allofus bought by global ad network McCann Worldwide – a move which has echoes of the digital boom of the early 2000s. This followed swiftly on the footsteps of last month’s deal that saw Writtle Holdings acquire the multi-consultancy Loewy Group.
Allofus was founded in 2003 as a breakaway from fellow digital group Digit. It was set up by current D&AD president Simon Sankarayya, alongside Orlando Mathias, Nick Cristea, Phil Gerrard and Mickey Stretton (who left last year to set up new consultancy Utile & Beau).
Allofus had remained independent throughout the digital feeding frenzy that ran up until the start of the economic downturn in 2008 and saw Digit itself acquired by WPP ad group JWT in 2004 and other major deals including Aegis picking up Glue London and Mother acquiring a 51 per cent stake in Poke.
Mathias says, ‘We made this decision quite a few years ago – to go in this direction – and we spent a lot of time trying to find the right partner. This isn’t something we needed to do and the move will open up a lot more opportunity for us, including more international work.’
As part of the acquisition, Allofus will move from its current Old Street address to the McCann London building in Bloomsbury at the end of September. ‘The lease was up so it makes sense’, says Mathias. While sharing space and working alongside its new sister companies, which include Futurebrand and McCann Erickson, Mathias says, ‘We’re keeping our brand and our name and we’re not changing our offer.’
Mandy Merron, partner at accountant Kingston Smith W1, says, ‘From the current interest that we are seeing we would say that digital remains a hot sector generating higher multiples on earnings against the more traditional marketing sectors, with many parties informally interested in acquisitions.
‘It’s not a bad time for sellers although premium values are generally being obtained by businesses with competitive edge through niche technology or markets – such as social media, interactive gaming or bleeding-ege technical development.’
Referring to the design sector in general, she says, ‘It wouldn’t surprise me to see further mergers and acqusitions in the medium term, but deals are taking longer to do in the current climate as there continues to be some uncertainty over the health of key clients, contracts go out for review or sellers are exposed to geographical markets over which there is still a question mark.’
If Merron is correct and we do see more acquisitions in the near future, none is likely to be of the same massive scale as the deal last month that saw Writtle Holdings acquire the Loewy Group.
Adding Loewy Group consultancies Seymour Powell, Epoch Design, The Team and Williams Murray Hamm to its exisiting roster, which includes 20/20 and Arken, Writtle has formed a 16 consultancy-strong group, working across design, branding, digital and PR which it claims will have revenues of around £100 million a year.
Referring to the deal, Loewy chairman Will Whitehorn says, ‘As marketing services continue to develop at the same rapid pace as digital technologies and social media, we believe that the winners will be those organisations in the industry that can invest for the future while remaining entrepreneurial in their outlook.’
Merron says, ‘I think [in terms of acquisitions in the design sector] that there has been a bit of pent-up demand matched with some opportunity. Some vendors have been waiting to sell for a while and some newer players coming in are hungry for growth and have the wherewithal to acquire.
‘Businesses that have maintained cash reserves and strong balance sheets are in an ideal place to make acquisitions that can exploit synergies and cost savings for some immediate performance improvements in readiness for growth as confidence slowly returns to the market.’