The Spotlight
The UK Marketing Services sector, like most industries (with the possible exceptions of online groceries and Amazon), was adversely affected when the pandemic hit our shores in March earlier this year. However, with a pivot in recent years towards digital services, many businesses in this sector were better prepared for the demands of the COVID economic landscape than their peers in more executional-oriented and recession-exposed markets.
There are well known reasons for this. Most agencies dealing with digital creative and web coding were able to make a seamless transition to remote/home working, and rather than having to place staff on furlough, or worse make redundancies, many firms have recorded an increase in the working week output of their employees without the shackles of the artificial 9 to 5.
Digital Acceleration, Resilience & M&A Interest
Clearly also the demand for digital marketing services has increased as consumers have moved their purchasing habits online, and consumer brands and retailers have moved faster on their digital trajectory. Marketing agencies specialising in market research, surveys and analysis have benefitted as brands look to understand their consumers in the digital retail environment.
The comparatively resilient trading performance of marketing services companies over the last six months has been a beacon for investors, both private equity and trade. M&A in the latter group has historically been dominated by the ‘Big 5’ agencies, however, from our frequent contact points with the market it is apparent that these conglomerates have taken a step back from the frontline in order to focus their resources on internal damage control from the pandemic within their own organisations.
What about the Big 5?
It appears the large agencies which for so long have dominated the marcomms landscape have been slower to adapt to the changing demands of the sector and have been weighed down by their legacy offerings at the executional end of the market upon which their original foundations were based. In their place we have instead been experiencing a clamour from mid-market organisations (such as Four, Mission, Sideshow, Strat7 etc.) who have experienced tangible but, for all intents and purposes, minimal damage from the pandemic and have now found themselves in a position with strong cash balances with which to grow their businesses through M&A.
Overall however, and encouragingly, marketing services is an attractive market at the moment when businesses in other sectors are struggling to keep afloat.
What’s Next?
If you own a business in the marketing services sector and are considering a company sale, or need options on short term financing from sector specialists, we would be happy to talk you through the above in greater detail and explore the options which might be available to your specific situation in the current economic climate.
We support companies and their shareholders to sell, acquire and raise equity funds, connecting UK and International investors & acquirors to successful UK companies. Our services cover Valuations, Competitor analysis, Deal data, Growth Factors, Deal Checklist.
We offer bespoke complementary research projects. Whether on market or competitor activity, company valuation, business planning or prepping a due diligence exercise, tell us what you need to drive your business value forward.