Accenture's Karmarama to expand with hire of 100 staff

03 December 2018 Consultancy.uk

Karmarama plans to expand its London headcount by a third in 2019, as parent company Accenture Interactive looks to double down on accelerating growth in recent years. Karmarama became part of Accenture two years ago, and suggests that since then, Accenture Interactive’s "experience agency of record" proposition has paid off in a big way.

When the news broke that consulting firm Accenture was in talks to purchase advertising agency Karmarama, the proposed deal was hailed as signalling the consulting industry was about to buy its way into the marketing services sector. Those inclinations were not wrong, and the deal sparked a 12 month feeding frenzy in which top-consulting firms splurged more than $1 billion on small and mid-tier agencies. Indeed, the purchase of Karmarama was by no means an isolated incident on Accenture’s part, either, and by the end of 2017, some sources were labelling the firm the world’s largest advertising agency.

While Accenture has continued to expand rapidly across borders, however, since the deal Karmarama has picked up international work but has not opened an office outside the UK. That is not to say that the agency has not enjoyed growth, and its most recent accounts at Companies House for the 16 months to August 2017 – a period that covers both before and after the sale – suggest revenues strengthened by an estimated 15%. The growth in demand does mean, however, that if Karmarama is to keep up with its enlarging client-base, a recruitment drive is overdue.

Accenture's Karmarama to expand with hire of 100 staff

Indeed, revenues have increased by about 20% in each of the past two years according to Ben Bilboul, Chief Executive of Karmarama, rising ahead of staff headcount. To that end, Bilboul recently told marketing news site Campaign that, as the agency marked the second anniversary of its sale to Accenture, it will recruit 100 new members of staff in the coming months. The agency currently employs over 300 people, so the prospective hiring spree would likely increase its size by as much as a third.

Bilboul explained that the measure would partially be to “catch up with growth” as well as to anticipate further growth next year. Karmarama has largely been able to hold off on this front for this long because it has a lower level of staff turnover than the industry standard. According to the IPA’s most recent figures, that average is 32%, however, Bilboul asserted that Karmarama’s ‘staff churn’ level sits “in the teens.” At the same time, Bilboul is one of six other Karmarama executives, including Executive Chairman Jon Wilkins, who all became Managing Directors of Accenture Interactive when they sold the agency, helping to keep them at the firm post-sale.

Now, according to Bilboul, the firm must focus on bolstering its capabilities by adding new staff. He explained, "We want Karmarama to continue to deliver creativity and empathy to our clients as part of the broader Accenture Interactive proposition. I think this is a good home for creative people – that’s our message to the market. We’re not trying to become entirely digital or entirely data-focused. This is a place where what you might term right-brain thinkers should flourish and grow and add value."

He added that Karmarama is especially set on hiring people who combine both emotional and rational skills to help offer holistic services to clients. He elaborated, "The skillset that is in really high demand and short supply everywhere are those ‘whole brain’ thinkers who can co-ordinate creativity, empathy, data and technology. Those are the people who are looking at the highest level to partner with clients."

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High employment drives deals to access fresh talent

09 April 2019 Consultancy.uk

The UK continues to have a historically low unemployment rate, resulting in a tightening employment market and demand for recruitment services. The industry topped £12.3 billion last year, while valuations continued to rachet up. There were were 32 firm acquisitions in the recruitment services space last year, up significantly on the previous five-year average.

Labour markets globally are tightening, particularly in developed economies. At the same time, access to top talent is becoming increasingly difficult to source, as demand for that talent continues to rise. Higher demand has been one of the key drivers for acquisitions in the space. New analysis of the recruitment M&A market, from consultancy firm BDO, looks at current trends and future projections for activity in the segment.

The UK employment rate has grown considerably over the past decade, with the number of NEET decreasing, more women joining the workforce, and older people continuing to work, among other trends. Participation rates hit more than 75% in 2018, up from around 73% in 2014. The unemployment rate dropped to 4.1% last year, the lowest level in more than 40 years.

UK Recruitment Market

 

The recruitment industry has enjoyed strong growth over the same period, with revenues increasing from around £8 billion in 2014 to £12.3 billion last year. However, the growth rate for the industry is expected to stall for the coming years – the firm is projecting annual growth of 0.1% to 2024. The stall reflects deep seated uncertainties stemming from the future of the UK, from migration to internal employment in an increasingly uncertain future.

According to the firm’s analysis of market trends for UK listed FTSE recruitment companies, their performance over 2018 outperformed the wider FTSE market by a significant market during some months – the end-of-year uncertainty hit both recruitment and non-recruitment firms with relatively equal strength. The drop partly reflects market sentiment about the future of the UK.

FTSE Listed Recruitment Firms Average EV/EBITDA Multiple

 

The study also considered the multiples growth, average EV/EBITDA multiples, over the past year – which has shown considerable ups and downs. The yearly average multiple of 10.4x was above that of 2017’s 9.9x – although a 26% drop at the end of the year was significant. The drop was tied to the relative volatility in macroeconomic conditions affecting the globe, though another major contributing factor has been Brexit and political instability.

Global M&A

The global recruitment M&A market was particularly active in the UK, with 32 deals last year – a five-year high, and well above the 17 recorded for second-place US. Deal activity in the UK was focused on expertise and capacity in industrial and technical sectors, reflecting skills shortages in those segments. The US was largely focused on healthcare-related M&A, representing 25% of their market.

Overall, of the 92 deals in 2018 (a 21% drop on 2017) generalist firms were the most in demand, at 25% of the total, followed by education at 14% and engineering & construction at 13%. Software saw relatively low demand, at 2%.Investment into the UK by country

In terms of investments made into the UK, domestic investment continues to be the most dominant, accounting for 24 deals. Japan made three deals, although Brexit is seeing the country become increasingly nervous about investment. The US accounted for two deals. The longer-term trend shows that domestic investment is up on 2017, hitting the highest level in five years, while the US has reduced its M&A investment into the UK.

Commenting on the results, the firm noted, “The latest report shows the recruitment sector remains strong and continued to grow through 2018 despite facing many challenges. Notwithstanding the personalised nature of these services, the market continues to evolve, seeing traditional recruitment firms utilising available technology along with new entrants showcasing innovative platforms.”

Related: High UK employment masks troubled economy.