The merger eco-system, post Publicom

In the wake of the disastrous Publicis-Omnicom affair, will the ad industry’s merger eco-system evolve? It’s already under-way, writes Dominic Mills.

If you’re not familiar with the term ‘acqui-hire’, it could well be a subject worth boning up on.

In Silicon Valley, where the term originates, an ‘acqui-hire‘ occurs when someone like Yahoo buys Summly, or Facebook takes over almost anything. The buyer makes the purchase in order to acquire the talent; their company or its assets are welcome too, but like the icing on the cake.

Last week’s purchase by Crispin Porter+Bogusky (CPB) of Richard Pinder’s fledgling outfit The House feels like just such a deal.

It’s interesting in its own right, but also because the deal may tell us something about the way, in the wake of the putative disastrous Publicom affair, the ad industry’s merger eco-system could evolve.

Of course we have yet to see how the likes of WPP, IPG, Havas and Dentsu – but not Publicis and Omnicom, which are too bruised to even think about anything major – plot their future relationships to each other – but in the meantime there will be two main strands to m&a, and they are likely to work in tandem.

The first is that small, fill-in deals will come back in to vogue, and the second is acqui-hiring. Fill-in deals are those that cover up a corporate hole: they can be geographic or by discipline, and they can sometimes best be accomplished by an acqui-hire, especially as in certain areas – data, tech or mobile for example – where the necessary skills might reside in an individual, or group of individuals.

To a certain extent, this is already under-way. Havas, for example, recently acquired data analytics outfit ElisaDBI, Revenue Frontier and The Work Club. And while Publicis and Omnicom were faffing around, WPP bought no less than 16 companies in the first quarter of 2014, six in tech and 10 in marcomms. None is large, but each brings specific talent, skills or location into the mighty empire.

Indeed, before it was tempted away from the straight and narrow by the charms of Maurice Levy, these deals were the essence of Omnicom’s recent m&a activity.

Which brings us back to CPB and The House. Pretty much by its own admission, CPB has been struggling to make its international offering work. It opened in London in 2011, and has recently set up shop in Scandinavia and Brazil. Its first European boss, Darin Brown (who bore an uncanny resemblance to his near-namesake, mentalist Derren Brown), was ‘disappeared’ in March this year, presumably because he couldn’t pull off the illusion of making it look like a proper micro network.

And that precisely is why CPB has acquired Pinder, who takes on the job of running both the UK and CPB’s international offering. This he is qualified to do in spades, having left the UK in 2000 to run Leo Burnett in Asia, before moving to Paris as COO of Publicis Worldwide.

It’s not clear where this leaves The House. It positioned itself as a near-virtual, collaborative-style, global shop and my sense is that, despite winning work from Levi’s, Lenovo and Argos, it had to fight tooth and nail to get itself heard, partly because the agency intermediaries couldn’t figure out which box to put it into. And like all start-ups, it was close to reaching the point where it could only get to the next level with help. CPB, by contrast, has sufficient lustre to get onto pitchlists by right.

So when CPB hove into view, it presented a quick solution for both sides. CPB’s announcement studiously avoids any mention of The House’s future as a brand, which suggests it’s a case of suck-it-and-see. There are a number of reasons to suggest The House may live on, if not as a brand, then as a modus operandi.

One is that clients like the idea of micro-networks, which is CPB’s direction of travel, because they are cheaper and more flexible. Technology means agencies don’t need a flag in every country in order to serve multinational clients. But you do need access to talent, especially creative talent, which is what The House’s collaborative model can deliver. Moreover, by and large, creatives prefer not to work in organisations that pursue size for its own sake, so they will be attracted to something like CPB.

All this suggests to me that we will see a spate a small deals. In truth, compared to sectors like pharmaceuticals or financial services, the advertising business is a cottage industry, and it should do what cottage industries do best: incremental deals.

The High Street needs a kiss of life

If, like most media people, you live in the economic bubble that is London, the devastation wreaked – not just by e-commerce but by other forces too – on the average UK High Street is probably just a theoretical concept. If, on the other hand, you live somewhere like Redruth, it’s a daily reminder of the profound change that we are going through.

It matters: the High Street isn’t just the spluttering engine of our retail economy, but a vital part of the social glue that brings, and binds, communities together.

As Mungo Knott, insight director of Primesight, will remind people at a MediaTel briefing on the future of the High Street later this week, the average premises vacancy rate on the High Street across the UK is 14%. That’s the average: if you live in parts of Wales or the regions, it’ll be a lot higher.

As a retail environment, it’s not going to improve, despite Mary Portas’s ‘let’s-refurb-every-shop-in-Farrow-and-Ball’ approach. Rapid growth in m-commerce will put paid to that.

So where does this sea-change in consumer behaviour and the retail environment leave the High Street? What are the implications of the connected consumer on socially critical public spaces like town centres? And how can we breathe new life into the High Street?

I’m chairing a panel, including ex-Iceland and Wickes CEO Bill Grimsey and Starcom MediaVest’s head of thought leadership, Steve Smith, that will be looking into these and other issues.

It’s invitation-only but I’ll report back on the main themes next week.

To get all the latest MediaTel Newsline updates follow us on Twitter.