Chicago-based private equity firm Lake Capital is buying Peter Scott’s Engine Group; the company that owns WCRS, US-based digital agency Deep Focus and social media agency Jam among others. The price is said to be £100m.
Lake Capital is buying out venture fund HIG’s 38 per cent stake in Engine and wants to roll Engine in with its other marketing interests which include Hollywood entertainment marketing agency Trailer Park and mid-sized research company ORC.
The move is part of a trend by LA-based entertainment businesses to butt into advertising. Droga5 recently sold a 49 per cent stake to giant Hollywood operation William Morris Endeavor (which now also includes sports business IMG) and smaller rival BLT announced this week that it was setting up an advertising division called BLT+.
£100m doesn’t sound a lot for a diverse group like Engine but it’s roughly equivalent to its annual revenue. Engine has come through the recession in reasonable shape but it has lacked the firepower to make big acquisitions and profits have been hard to come by.
Lake Capital co-founder Terry Graunke says: “Our thesis is that pre- and post- the Omnicom-Publicis merger and lack of completion, there’s a real opportunity to create a middle-market player in the space.” Graunke reckons that Engine alongside Trailer Park and ORC will turn over about $400m.
Engine shareholders will do pretty well out of the deal (about half the company is owned by directors and staff) but it’s shame to see another ambitious indie effort succumb to American money and the increasingly apparent power of Hollywood.