A few days ago, while enjoying my afternoon coffee, I was surprised to receive a call from a management consultant who specialises in acquisition of upcoming digital agencies by bigger traditional agencies. To rephrase, as he said, that was one of his core areas of expertise. Though random, the call intrigued me. I prodded the consultant more than he would have expected, to understand how exactly I could get my company acquired – purely out of curiosity. As our conversation unfolded, I learnt from him that big traditional agencies are vying for indigenous digital agencies, to gain inorganic growth. This was confirmed when I read Publicis Groupe acquiring Mumbai-based digital agency Indigo Consulting. The deal size, even after extensive search, I have not been able to find out. Economic Times mentioned that Indigo Consulting does a revenue of Rs 20-25 Crore annually. The 100% acquisition deal must have been sizeable here. For an agency started in 2000, Indigo has an impressive client roster which probably made it tempting for Publicis Groupe. Indigo would collaborate with Leo Burnett India.
In 2007, WPP, with its Pacman-like tendency to grab dotted agencies all over the world, acquired upcoming Quasar by picking up a 75% stake. Capital18 famously invested in Webchutney; no deal details are available on the Internet. Since then, there have been more acquisitions and it seems M&A will gain traction in the coming few years. Indigenous digital agencies doing anything more than Rs 10 Crore business can get excited and get a good deal if they are looking at stake selling. For traditional agencies, this might be the right time to acquire as well because digital is getting hotter. However, they’d be better of acquiring digital agencies that are more competent in mobile and tablet space, as that is where high percentage growth lies.
This may also mean that small digital agencies with revenue of even Rs 1 Crore a year would aggressively look at upping the ante to get a decent valuation done. A strategic acquisition of a small digital agency can infuse money, talent, clients, value, training, and far more benefits. To become eligible for digital ‘services’ company, it would largely be inevitable to build a strong portfolio and formidable team as well as team size. Multiple-city presence may also bring far more value.
I am yet to meet the management consultant who called me, but few things that he said did excite me. Needless to say, I’d keeping a close eye on M&As in digital space.