Consultancies are increasingly interested in acquiring marketing agencies

03 August 2018

In 2017, nearly half (48%) of all acquirers of marketing services businesses came from a non-traditional marketing communications background, with consulting firms playing a highly active role. Accenture and Deloitte rank high in the list of the top ten acquirers – the two consultancies, along with McKinsey & Company, have now spent $1.2 billion on marketing services assets, sending an aggressive signal to market incumbents.

Global consulting and technology firm Accenture marked its first serious foray into marketing services when it acquired London creative agency Karmarama in 2016, and now has 18,000 digital and creative professionals worldwide. Deloitte Digital made nine marketing services acquisitions in 2017, including that of Market Gravity in the UK, Acne Agency in Sweden, and now features as a key challenger on Gartner’s Magic Quadrant for digital marketing. 

Increasing blurring of service lines

Traditionally consultancies have focused on large scale corporate transformation and IT projects; whilst the domain of marketing services has primarily been advertising strategy and implementation. Yet in this digital world, large consulting projects are increasingly framed around enhancing the customer experience. Consultancies are now looking at strategy execution capabilities, along with their traditional advisory models.  For instance, Karmarama gave Accenture the ability to connect the thinking behind new strategic ideas with the actual implementation of end-to-end customer experiences through elements such as user experience design, customer focused data analytics and customer engagement strategies. 

Consultancies are increasingly interested in acquiring marketing agencies

Power of data

Consultancies have a huge advantage over their marketing services counterparts via their access to powerful consumer insights collected over many decades. With data driving the vast majority of marketing services decisions including campaign design, events and customer touchpoints, this is driving a new level of overlap between traditional creative services and technology. With many consultancies pushing for this data to work harder and bring in new revenue streams, creative services is a logical next step.

Pressure on big marketing networks

Marketing and advertising giant WPP has hit the headlines recently for all the wrong reasons and it has highlighted the pressures on large marketing networks. Marketing budgets particularly for FMCG companies are shrinking. Equally marketing networks have been criticised for their slow reaction times, excessive complexity and the opaqueness surrounding their expenditure. Digital disruption has also resulted in media buying and production, market research, and strategic planning all becoming increasingly automated and commoditised, which has had a significant impact on agency pricing models. With big networks arguably on the decline, there have been rumours that one could look to sell to a consulting group.

Culture clash

The most valuable asset for a marketing agency is the talent that it employs, which makes it unlikely to see a hostile take-over by consultancies. If employees do not like their new incumbent owner, it is likely that they will vote with their feet. This leads to the next problem in that the cultures of marketing agencies and consultancies are very different. Consultancies also pay employees significantly more. Consequently it seems unlikely that consultancies will be successful at fully integrating agencies and therefore are likely to run them as stand-alone assets.

Looking ahead

Integrated advertising revolutionised marketing in the 1990s, as creative agencies began to focus on a number of touchpoints. Today the threat from consultancies is likely to have as big an impact – which marketing services cannot choose to ignore. Whether a consultant can create a perfectly formed service, capable of meeting all creative and consulting requirements, only time will tell. The pessimistic view is that agencies will have to sell out to consultancies, as they see their market share increasingly decline. The more optimistic view is that as the marketing landscape continues to evolve due to technological changes, marketing services and consultancies will simply have to create synergies in order to meet client demands. 

An article from Kirsten Handley from Clearwater International, a mid-market corporate finance firm that has a track record in the consulting industry.


SQW Group purchases property-based regeneration consultancy

19 April 2019

UK consulting firm SQW Group has completed its first acquisition since it completed a management buyout in January 2019. BBP Regeneration joins the company having collaborated with SQW for more than 20 years.

Established in 1983, SQW Group now operates all over the world. Comprising SQW, Oxford Innovation, Oxford Innovation Services – one of the UK’s leading innovation centre operators – and Oxford Investment Opportunities Network, the organisation’s origins can be traced to Britain’s two ancient university cities: Oxford, through Oxford Trust founders, Martin and Audrey Wood, and Cambridge, through SQW’s work in producing The Cambridge Phenomenon.

The consultancy specialises in public policy, working with entities from the public, private and voluntary sectors to research, develop, implement and evaluate social and economic development interventions. It now employs over 250 people across regional offices in London, Oxford and Edinburgh, and provides business support to over 4,000 entrepreneurs and small businesses each year. At the start of 2019, SQW secured its independence in a management buyout, advised on by M&A experts from Liberty Corporate Finance and Penningtons Manches.

SQW Group purchases property-based regeneration consultancy

SQW has strengthened its position as a provider of services across the business spectrum with the acquisition of BBP Regeneration. Founded in 1994, the consulting firm specialises in land and property-based regeneration and growth schemes, and is a leading social and economic development consultancy. 

The two firms first worked together over 20 years ago, when SQW and BBP collaborated to develop the first Regional Economic Strategy for the South East. More recently, they developed an economic strategy for Thanet and are now working together in locations stretching from Cwmbran via Oxfordshire to London.

With the addition of BBP, SQW can now provide an integrated advisory service for organisations developing property schemes which deliver economic benefit to their local area. By joining SQW, meanwhile, BBP hopes to further enhance its ability to support clients in delivering property and place-making ambitions. 

Speaking about the deal, SQW CEO David Crichton-Miller commented, “The UK more than ever needs solutions to the challenges of places – of high streets under threat, of meeting housing delivery targets, and of both economically over-successful and economically challenged towns and cities – and the combination of SQW and BBP is uniquely suited to developing those solutions. [This deal] brings together critical and complementary services relating to places to serve our clients with leading edge and practical advice.”

Andy Smith, Director of BBP Regeneration, added, “SQW shares with BBP the same values of seeking to provide outstanding, practical, real world advice that helps get buildings built and places developed.  We greatly look forward to the opportunities that come from joining our two organisations together.”