The advertising agency industry is highly fragmented, with the top three advertising agencies accounting for less than 30.0% of industry revenue. However, more than 80.0% of agencies have fewer than 10 employees.
The market generally recognizes six different types of advertising agencies:
Currently 85 cents of every new dollar
spent in online advertising will go
to Google or Facebook.
Having an effective performance monitoring system — ability to show clients the results of their spending and the direct results (on sales and brand awareness) of the company's campaign
Having upstream & downstream relationships — good relationships with media buyers and media outlets are required to ensure a good return on investment
Ability to quickly adopt new technologies — awareness of new technologies in the industry and general trends in technology, new media and opportunities for advertising
Ability to compete on tender — ability to prepare professional proposals for work and accounts to secure contracts
Ability to produce unique and creative ideas — unique ideas help agencies secure and retain clients
The industry is in a period of consolidation.
We are forecasting a continued increase in merger & acquisition activity for the balance of into 2019 into 2020 for the advertising industry. The longer an industry consolidates, the fewer the buyers and the lower the values paid to those owners left standing who do not “strike while the iron is hot”.
Missing an industry consolidation is costly.
We have data on 227 closed transactions internationally over 3 years. We also have more specific data on 18 transactions showing multiples ranging from 2.1X to 40.2X recast EBITDA. As mentioned previously many factors will affect value.
Our data shows, that most closed transactions were a single buyer acquiring one, and one advertising agency only. The market is wide open; yet the industry is consolidating.
In addition to the data on the 227 closed transactions, our internal and proprietary Buyer List for Advertising, Media, and related companies has 411 international strategic acquirers, 157 Private Equity Group’s (“PEG’s”) that own similar companies ,and 264 PEG’s that have a stated interest. Our existing total buyer list for Advertising and Media Agencies is 1,059 domestic and international buyers.
The only way to be sure of the value of a private company is to confidentially open the market.