In the past month, there have been some ripples in the otherwise lethargic industry M&A marketplace. Sapient announced it would acquire independent Nitro in a $50 million deal, while Microsoft's Razorfish is said to be in play. Across the Atlantic, independents M&C Saatchi and The Red Brick Road, the shop set up by Frank Lowe and his partners to handle Tesco, have talked to other agencies and holding companies about selling, sources say (although Paul Hammersley, a partner in The Red Brick Road, denies the agency wants to sell).
Within that group, digital powerhouse Razorfish, with $345 million in revenue, is in a league of its own and already is said to be getting attention from Publicis Groupe. But for agencies with more traditional roots that are looking for a buyer, the marketplace is not promising. Strategic buyers are grappling with the weak operating environment and anemic stock prices. Equity investors are faced with continuing tight credit markets and industry conditions that make the sector a less attractive option, with longer exit horizons and lower yields."The large agency holding companies have substantially completed building out their footprint in North America and that extends not only to the capabilities associated with general agencies, but increasingly to things like digital services, direct, database marketing," observed John Prunier, partner at Petsky Prunier, who allows that there will still be smaller acquisitions to fill in gaps.
Gone are the days when agency principals could expect a nice payday just for selling their client Rolodex.
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