Deloitte and EY acquire design agencies Brandfirst and Citizen

07 February 2018 9 min. read

Deloitte and EY have each confirmed the acquisition of a design agency, as competition in the advertising space continues to heat up. The deals for Brandfirst and Citizen are geared toward the firms winning a market share from established advertising industry incumbents, whose spending has flagged in recent months.

Over the past 12 months, competition has been heating up in the advertising industry, as multiple giants from the consulting and IT world each lined up a succession of acquisitions to enter into the sector. Due to the size and multidisciplinary nature of the world's largest consultancies, firms are able to compete with long term market incumbents by offering a holistic service.

Interest from the consulting industry was so intense that it kept M&A in the marketing services industry stable over the past 12 months, despite a significant drop in investment from traditional players. Top agency holding groups including WPP, Dentsu, Omnicom, Interpublic and Publicis spent a collective $1.8 billion over the course of the year, a reduction of 46% on 2016 levels, but major consulting firms, including Accenture, Deloitte, IBM, KPMG and McKinsey & Company, invested more than collective $1.2 billion in agency acquisitions in 2017, a 134% increase on 2016.

2018 has already seen this trend continue, with a number of deals concluding before the first month of the year was over, such as Accenture's signings of award winning creative firm Rothco, and design agency Mackevision. Now, two more deals have been announced, as major consulting players continue their march into the advertising realm. Deloitte has announced the acquisition of Brandfirst, while simultaneously, Big Four rivals EY have also confirmed the purchase of strategic design firm Citizen.

Deloitte and Brandfirst

Deloitte’s acquisition of Brandfirst is aimed at further strengthening the position of Deloitte Digital, Deloitte’s digital agency, following two years of rapid expansion. Most recently, this saw the firm purchase Swedish creative consultancy Acne, and UK-based Market Gravity, in a year when the firm spent a total of $144 million on such deals. Deloitte hopes that Brandfirst, an interactive marketing agency based in Evere, Belgium will further bolster its digital arm, as it courts new business across Europe. Brandfirst already counts TCL, Yahoo, Thales and Alcatel among its clients, and Deloitte believes that their close cultural fit, combined with their position in the global design market will bring business their way.

Deloitte Digital acquires Brandfirst

Brandfirst designs and develops interactive experiences based on innovative signage technologies and content management systems. At the core of the firm’s work is a believe that technology should be intuitive and natural to use, optimising the consumer experience, whether in the digital or physical world. Extending a “phygital” (digital/physical) offering through interactive technologies and content management, is the next step in Deloitte Digital’s roadmap to accruing a share in the design market, and Brandfirst’s operational expertise regarding digital signage, in particular is seen as a way to complement Deloitte’s existing digital transformation offering for clients, as we as for the firm’s offerings in digital technologies such as SalesForce, SAP, Apple and Adobe.

Rolf Driesen, Managing Partner of Consulting at Deloitte Belgium, said, “Brandfirst is a perfect addition to Deloitte Digital. We see a growing trend towards phygital, the convergence of the physical and digital worlds. This acquisition will enable Deloitte to strengthen its expertise in interactive signage technologies and interface design. This acquisition will bolster Deloitte Digital’s position as the leader in the market, capable of helping our clients to integrate the communication tools of tomorrow.”

Philippe Delhez, Brandfirst CEO, added, “Together with the Deloitte Digital team we will bring the digital experience in stores and showrooms, but also in more traditional places like bank branches – wherever operations are being digitised but where the brand experience remains important.”

EY and Citizen

EY’s 2017 was markedly more quiet for digital design acquisitions, however the firm did make a mark in relation to innovation and technology – particularly with the purchase of BOX, now EY-BOX, which is currently working closely with EY’s 15 innovation and technology centres around the world. The new solution encompasses partners and professionals working out of BOX Associates’ existing Co-Lab facilities that also hosts several high profile technology entrepreneurs, investors and corporate innovation teams today, including Uber, Simple Feast and ByFounders, a newly established venture fund.

This year, as EY seeks to make a more direct entrance into the digital design space, the firm has completed the purchase of Citizen, a strategic digital design firm based in Portland, Oregon, for an undisclosed fee. The deal is aimed at complementing EY’s US consulting business, particularly in customer experience and design with new industry expertise, while expanding the company’s West Coast digital consulting presence. In 2016, EY expanded its West Coast presence by joining forces with Seattle-based Society Consulting, an analytics and big data consultancy.

EY shifts into high gear with Citizen acquisition

Highly-regarded as a strategic innovation, design and digital consultancy, Citizen helps clients to envision and create opportunities that improve business function and customer experience. EY believes these strengths will enhance its existing capabilities across several areas, including strategy, digital transformation, cybersecurity, analytics, virtual and augmented reality, and technology solutions. In return, Citizen’s Portland headquarters will now be able to leverage the state-of-the-art EY wavespace network – a global growth network aimed at industry disruption – in order to convene clients and thought leaders and facilitate collaboration.

Kris Pederson, Head of Strategy & Customer, Americas for EY Advisory, said, “At EY, we believe that a better working world means addressing complex digital strategy and execution issues to deliver outcomes that grow, innovate and protect our clients’ businesses. Our union with Citizen will enable our client teams to deliver more cutting-edge solutions so they can navigate the transformative age with courage and confidence, and with a stronger digital toolset.”

“We share EY’s dedication to quality and strong client service,” commented Jenny Moede, Executive Director, and formerly CEO of Citizen. “Our team is fearless when facing complex business challenges; we design user-focused digital experiences that drive positive change for our clients and their customers. This approach mirrors the EY purpose of building a better working world. Citizen and EY are a great match, we are complementary organisations with shared values and a strong, aligned, strategic view of the future.”

Design to consulting

While this continuing trend might point toward a new era of competition in the advertising space, however, major market incumbents remain keen to down-play its importance. WPP, particularly, issued a parting shot during an end of year report in 2017, 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. The firm meanwhile spent $652 million on acquisitions in the design space, compared to Accenture’s statement spending of $1.02 billion in the sector.

Interestingly, however, WPP has commenced its own campaign of acquisitions elsewhere. The firm is adding to its consulting wing, Kantar. 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.