Accenture, Deloitte and McKinsey spent $1.2 billion on agency acquisitions

05 February 2018 Consultancy.uk

The consulting industry’s collective spend on marketing and advertising powered past the $1 billion mark in 2017, according to new data. Even with data from a selective sample without some of the industry’s biggest names, consulting firms spent a significant sum on acquisitions in the sector, beefed up significantly by Accenture’s huge war chest in particular.

Interest from the consulting industry has kept M&A in the marketing services industry stable over the past 12 months. The market saw a significant drop in investment from traditional players, as top agency holding groups including WPP, Dentsu, Omnicom, Interpublic and Publicis spent $1.8 billion over the course of the year, a reduction of 46% on 2016 levels.

According to analysis from marketing consultancy R3, however, M&A activity in the sector was bolstered by the plans of major consulting firms, including Accenture, Deloitte, IBM, KPMG and McKinsey & Company, who invested more than collective $1.2 billion in agency acquisitions in 2017, a 134% increase on 2016.

Aggressive expansion

Multidisciplinary consultancies continue to seek areas in which they can grow their operations, and throughout 2017, this saw aggressive expansion campaigns on the part of a number of firms. Such firms boast huge headcounts, in some cases possessing a staff twice the size of top firms in the advertising world, according to a number of analyses. This theoretically gives consultancies an upper hand in winning key business away from long-term market incumbents, as they have the potential of completing tasks across a variety of skill-sets and sectors in-house, at a rapid pace, to provide a quick holistic service.

M&A Spending of consulting firms and advertising agencies

Accenture are perhaps the most notorious example of a large consultancy utilising this ethos. The firm announced a massive global acquisition plan in 2017, worth $1.8 billion, in order to try and get the jump on competitors across a number of sectors Accenture planned to enter. Ultimately, the analysis concludes that the lion’s share of this war chest was spent in the advertising and design space, as Accenture poured around $1.03 billion into its Accenture Interactive arm.

Ultimately, this tactic payed dividends for the firm. By offering to leverage the firm’s huge headcount of 400,000 – now supplemented with talent from numerous mid-sized agencies including award winning firm Rothco – in the provision of a quick and effective end-to-end service, the consultancy was capable of winning high profile work from the likes of publishers Pearson, and the Vatican.

Other non-traditional acquirers also made designs on a sector which is seemingly perceived by a growing number of firms as ‘up for grabs’. While the available overview of the industry is far from comprehensive, not including Big Four firms EY or PwC, five other consulting firms made large investments in advertising agencies. Although significantly less than Accenture’s figure, Big Four firm Deloitte sank $144 million into acquisitions in the sector. This saw groups such as Swedish creative agency Acne incorporated into Deloitte Digital, which already boasts multiple global and UK offices, and was recently named a Netsuite Partner of the year, having become one of the world's largest implementation partners for NetSuite solutions, providing a holistic service which includes business strategy, customer engagement, technology implementation, and operational readiness.

Top unconventional buyers

Other consulting industry members IBM, McKinsey & Company, and fellow Big Four firm KPMG, also made inroads into the sector with purchases of their own. However, the firms invested significantly less, spreading a much lower combined deal value of $59 million between them.

Outside the consulting world, the professional services world saw IT services specialists Modus Global Link solutions spend $476 million, while fellow IT sector firm Cognizant spent $252 million on M&As involving digital agencies. This included deals for Netcentric and Zone. This helped the firm win contracts from, among others, the English Football Association. 

Other interest included players from the publishing, Private Equity and technology sectors. Snap Inc, a US camera company, invested $146 million into growing its advertising solutions wing, while entertainment conglomerate RTL spent a similar $145 million.

Design giants strike back

While this trend seemed to herald a new era of competition in the advertising space, however, major market incumbents were keen to down-play its importance. WPP, particularly, issued a parting shot during an end of year report, concluding that the advertising footprint of consultancies had been “wildly overestimated” by the press.

WPP's net sales fell 1.1% in the third quarter, better than the previous three months, but there was no sign of improvement as it expects annual sales will be "broadly flat" and reduced its profit margin target. Among the companies that are part of WPP are Grey Group, Burson-Marsteller, Hill & Knowlton, Millward Brown, Ogilvy & Mather, Young & Rubicam, Landor Associates, and JWT. The company, which is listed on the London Stock Exchange, is one of the 'Big Four' advertising agency companies, alongside Publicis, IPG and Omnicom.

Interestingly, however, WPP is throwing its considerable weight behind a new campaign of acquisitions in the consulting space. In part this could be to combat consulting firms within the advertising space, by being able to display holistic capacities of its own. However, the investment in the recently united Kantar Consulting – which obtained London consultancy Mash earlier in January – could also be a sign of things to come more generally, with advertising firms looking to boost their flat-lining growth with an adventure into a new space; that of the consulting industry.

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Accenture's push into the creative sector is an identity crisis

18 April 2019 Consultancy.uk

In its latest push into the creative sector, Accenture Interactive acquired New York and London-based ad agency Droga5 earlier this month, adding illustrious clients such as HBO, Amazon and The New York Times to its roster of clients. With the latest in a long line of similar purchases, Accenture Interactive further demonstrated its ambition of becoming the globe’s leading trusted advisor to chief marketing officers. Yet according to Ben Langdon, Chairman of Class35, Accenture’s strategy may be heading in the wrong direction.

A press release on Accenture’s website announcing the acquisition sits next to a quote stating that “brands aren’t built through advertising” – a huge contradiction from a consultancy firm hell-bent on becoming the ‘CMO agency of choice’. It’s not alone of course. The entire consulting industry wants a piece of the creative pie right now. In addition to Accenture Interactive, recent acquisitions by PwC Digital, IBM iX, and Deloitte Digital meant that in 2017, for the first time ever, four of the world’s ten largest creative agencies were consultancies.

So just what it is that Accenture wants to achieve from this? For one thing, it’s clearly trying to be a digital transformation business. A one-stop creative shop rivalling more traditional models, it wants to lure CMOs in with the promise of lower ad spend and a “more impactful customer experience”. At the same time, though, it’s still in thrall to those same slinky, shiny branding and advertising agencies it’s attempting to disrupt. The Droga5 acquisition and that of Karmarama a few years before are both testament to this.

There’s a fundamental problem with this, though. Digital transformation businesses don’t sell to CMOs. These people have enough on their plates trying to transform their own marketing skills in order to keep up with an ever-changing market – they just don’t have the time or the energy to concern themselves with digitally transforming a whole business. If Accenture’s purpose is digital transformation, then going after creative agencies is barking up the wrong tree.Is Accenture's push into the creative sector an identity crisis?

Worlds apart

Perhaps more importantly, these two industries are worlds apart in terms of the way they think. Creative agencies are all about ideas, campaigns and consumers. Digital businesses, on the other hand, are customer-driven – they think in terms such as lifetime value, measurement, and efficiency. Customer-led thinking is an entirely different beast to consumer-led thinking.

The reality is that the arrival of digital and an all-encompassing obsession with technology, measurement and social has led to the death of agencies in a reductive, zero-sum, efficiency-focused battle with brands. Indeed, agencies have become so obsessed with the latest tech fads, they’re beginning to forget how brands work. Worse still, they’re beginning to forget how brands are built. And, by forgetting, they’re destroying their own values.

Killing creativity

All things considered, it really feels to me as though Accenture is a chip leader in a game it doesn’t understand. Expensive acquisitions like these show that they’ve got the big money, but they don’t appear to have any idea what they’re doing with it. Take talent, for example. The best talent in the creative industry right now is out in the market; it’s not tied to any one agency. Both agencies might well be at the top of their game, but why would a consulting firm waste so much money on buying them when they could hire high-quality creative talent on a contingent basis instead?

As their presence in the top 10 creative agencies shows, there is a growing trend in which Accenture, like many of the other big players, are buying up agencies as if they were nothing more than keywords. What they’re really buying, though, is a collection of credentials, clients and IP. Unfortunately, the talent that created those credentials aren’t going to stay at the business, the clients that hired the agency in the first place won’t be interested in buying what is basically just another part of Accenture, and the IP never really existed to begin with.

Droga5, for example, was one of the few agencies that did great brand work the old-fashioned way – undoubtedly something that made it attractive to Accenture in the first place. The irony, though, is that by leading it further away from the way of working that made it so special, the consulting giant will kill its creativity.

“Accenture Interactive has been dazzled by its ambitions to become the CMO agency of record…. But, in flashing its cash, it is spending millions on acquiring nothing of any value.”

If pressed, the recently acquired agency staff at Accenture will tell you just how dysfunctional the new arrangement is. They’re largely unfulfilled. Rarely do they feel their work has any sort of meaning or purpose. What’s more, the different disciplines have found little or no common ground, and find it hard to work together as a cohesive whole. It’s not surprising, then, to see talented people leaving in droves.

Beyond the window dressing 

It’s clear, then, that consulting firms and creative agencies are no easy bedfellows. But in his company’s defence, Accenture Interactive’s Senior Managing Director for North America, Glen Hartman, described its culture as being “far, far away from what a stereotypical consulting firm would look like. Our office and studios look a lot like Droga5’s.”

In demonstrating a belief that office design equates to workplace culture, this statement serves as an illustration of how confused Accenture is right now. It wants to justify its new strategy so badly, it’s started dressing like a creative agency. But if you look beyond the window dressing and see that you and your partners are speaking a different language with a different purpose, selling to different people in a different market, there’s no getting away from the fact that you’re different.

Accenture Interactive has been dazzled by its ambitions to become the CMO agency of record, and it wants to dazzle others with its new direction. But, in flashing its cash, it is spending millions on acquiring nothing of any value.

Related: Space between consulting firms and creative agencies is converging.