After a recovery of a few years M&A in the Dutch digital market is heating up. Aside from the traditional buyers (WPP, Publicis, Aegis and IPG) new platform companies have emerged such as Mediamonks, Oxyma and Tamtam. These companies, backed by large PE firms, are actively scanning the market to find additions to their product portfolio and we anticipate multiple transactions to be executed.
Why these firms and why now?
Why is M&A heating up? After a number of more difficult economic years growth in the digital market accelerating again. The previous downturn also has shown that larger digital agencies are not that cyclical. Typically a large percentage of their revenues is not recurring by contract but appears to be recurring by nature. The client relationship are so deep that even in difficult times clients continue to spend with these agencies.
What’s the model behind it?
We believe that due to the limited multiples and long earn-out periods that the traditional buyers used to be paying for acquisitions, these new platform companies see good opportunities to offer more attractive multiples and scoop away the most interesting companies. However, our research points out that the earlier mentioned traditional buyers are inclined to pay much higher multiples as soon as the target is large & international. Adding together multiple companies obviously creates a large company but even more interesting, we believe that there are quite a few revenues synergies to be gained by combining the complementary services portfolio’s.
Altogether, we think that the buy & build activity has just started. Next to that, we wouldn’t be surprised if this ‘Dutch’ trend will be exported to neighbouring countries such as Belgium, France and Germany.
We recently posted a slideshare presentation on this topic.