Digital Agency

Why investors see M&C Saatchi as the linchpin of a new data and digital agency empire

Why investors see M&C Saatchi as the linchpin of a new data and digital agency empire
Written by publishing team

Now that it’s been confirmed that M&C Saatchi’s creative store may change, we’re exploring why the agency’s potential acquirers are interested in the business.

M&C Saatchi is the subject of a possible merger bid, confirmed today (January 7). AdvancedAdvT Limited, an acquisition company headed by investor Vin Murria, already a non-executive director at M&C, has announced its ambitions to merge its stock exchange with the agency.

In a statement issued earlier today, AdvancedAdvT said it “confirms it is interested in exploring a stock exchange merger between M&C and the company.”

What happened?

Stock market watchers were alerted to a potential deal yesterday, when AdvancedAdvT bought a 9.8% stake in the agency. Among the shares already personally owned by Murria, and shares recently purchased by AdvancedAdvT, potential acquirers now own a 22.28% stake in M&C Saatchi. Murria, who previously founded the Advanced Computer Software and Computer Software Group, is the company’s largest single shareholder. M&C’s stock price soared on the news, closing 19% higher than its position the day before — its highest in three years.

The London-based agency was founded by Morris and Charles Saatchi in the 1990s after a split from Saatchi & Saatchi, now owned by Publicis Group. But accounting inconsistencies revealed in 2019 hit the business hard, costing it more than £6m in fees and the departure of directors including Maurice Saatchi and Torey counterpart Michael Dobbs; A subsequent hit to its share price allowed Murria to acquire a 12.46% stake in the company in April 2020.

Since then, the agency has recovered under the leadership of Moray MacLennan, reporting a similar revenue increase of 21% in its latest interim results and closing about 20 of its operations around the world. The company said the past year “represented a major turning point for the group”.

Lucinda Peniston-Baines, Managing Partner of Observatory International Observatory, explains: “M&C had had a very difficult two years with the accounting scandal, but it looked as if McClennan had successfully stabilized the ship. Just before Christmas they were talking about positive trading results. Extremely, they hired a lot of new hires around strategic leadership and new creative hires. I felt as if they were starting to come down from behind.”

Why would Vin Murria want to buy M&C Saatchi?

“The merger creates an opportunity to build digitally focused data, analytics and creative marketing businesses with a strong balance sheet and additional management expertise to transform business at a rapid pace and implement complementary mergers and acquisitions,” AdvancedAdvT said.

According to Peniston-Baines, “There is a logic in Murria seeing an opportunity to invest and leverage data and analytics from the back of a relatively well-known group.”

M&C has been a very creative business…but what they haven’t been known for is a really solid data business. If you think about WPP and Accenture who have made big acquisitions in the field over the past few years, M&C has nothing in this league,” she says.

Through “strategic and proven acquisitions,” AdvancedAdvT said it hopes to capitalize on the massive demand among customers for digital transformation, data services, and innovation — with M&C Saatchi at the center.

The statement continued, “Other digital marketing groups have successfully used mergers and acquisitions to gain digital power. We see a significant opportunity for the expanded group, with data, analytics, accelerated digital strategy and joint oversight, to achieve similar valuation multiples.”

Even with the added focus on accumulating digital capabilities and data, the company’s new owners will have to work hard to maintain its reputation as a healthy creative force.

“Maintaining a creative legacy while trying to transition to a much more data-driven digital business … is an ongoing struggle for many agencies,” says Peniston-Baines.

It may take some time for any integration attempt to materialize. In a statement issued yesterday, M&C confirmed that “no offer has been received but the Board of Directors has been told to expect an offer in the near term.” The agency advised shareholders not to take any action in the meantime.

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