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Ciesco – 2020 adland M&A deals down 17 per cent but signs of recovery in third quarter

Boutique advisory firm Ciesco has been analysing this year’s M&A advertising and media deals to date and found – unsurprisingly – that the total is down year on year – by 17%.

The first quarter (pre-Covid for many) saw the largest number of transactions – 42% to date. This coincided with booming stock markets and a positive outlook for global economic growth. In March, as countries announced nationwide lockdowns, stock markets crashed.

Following that there was a significant decline in the second quarter as many deals due to be completed in April-May, were put on hold due to Covid uncertainties and fears. In some instances, the deals process was even fast-tracked to get ahead of further Covid-19 fallout, and these deals were completed in Q1. As the pandemic unfolded, both buyers and sellers found it difficult to evaluate and corporates focused on cash preservation.

However the volume of deals increase in the third quarter by 13% and Ciesco says it expects the number to increase further in Q4.

No mega deals have been announced in the last 9 months, and overall deal value decreased 56% to $38.5bn. It is important to note that the majority of deal values remain undisclosed and therefore these values cannot be considered a refection of the deal activity. Some of the higher-value deals that were completed in this period include Platinum Equity’s acquisition of Cision in January, for $1.5bn, and Banijay’s acquisition of Endemol Shine Group in July, for $2.2bn.

Geographic trends

Geographically, the US and the UK have always been the countries with the highest number of M&A targets, and, expectedly, they saw the largest decreases in deal volumes – 20% and 35% respectively. There was an increase in the deal volume in the APAC region, mainly driven by China and Australia. In Western Europe, the deal volume has gone down by eight per cent. However in France, the deal volume has actually increased by 17%.

By sector

The most sought-after target sectors were digital media, driven mainly by acquisitions of online gaming and esports companies, and traditional media, with 170 and 168 deals, respectively. One of the most notable deals was Microsoft’s $7.5bn acquisition of ZeniMax, one of the largest, privately held game developers and publishers in the world with over 2,300 employees. by Microsoft for $7.5bn.

The only sector that saw a year-on-year increase was CRM, with 38 transactions completed this year to date.
As has been the case for the past several years, the top buyers list is diverse and includes consultancies, networks, private equity buyers, mid-market groups and tech companies. Accenture maintained its position as the most active buyer, completing 11 transactions globally.

The holding networks also remain active acquirers in the market. Dentsu and WPP bought four companies each – in the data & analytics space, agency services and strategy consultancy. For a year-on-year comparison, in 2019 WPP didn’t feature on top buyers list at all, whereas Dentsu had completed 13 acquisitions.

Next15, Sir Martin Sorrell’s S4 Capital and Stagwell Group also demonstrated an appetite for acquisitions. S4 completed four acquisitions, and Next15 and Stagwell Group completed three deals each.

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