Last week, Waypoint Partner Otto Stevens, Waypoint North Partner Phil Gripton and I hosted an M&A dinner for Manchester based agency founders at Simon Wood’s fantastic restaurant in the heart of the “Cottonopolis”.
In addition to the mouthwatering 7 course tasting menu, the night served up a number of topical discussion points: ranging from the deliberately provocative why isn’t the “Northern Powerhouse” punching above its weight? to the more exploratory how is data changing the creative process?
At our dinners, we provide insight into the current M&A landscape, what buyers are after and current deal valuations. Otto began by providing some context around the global/UK M&A market and the big changes that have occurred in recent years. No longer are acquisitions dominated by the big 4 networks – some of which are readjusting their business models to correct structural inefficiencies. Now agency buyers tend to be more diverse in origin (for example, the recent sale of Blueleaf to OSF) and are often looking for specific capability to boost or add to their existing offer. Capability that they know will drive incremental value across their pre-existing client base or portfolio of brands. There’s also the private equity route, as seen with the investment that Phoenix made in 1000heads last week.
There is some evidence that clients are driving the shift away from a full-service model. Instead, favouring specialist agencies to have agility, fresh thinking and improved marketing and sales performance. And where clients lead, buyers follow. Is it that “full service” is broken? Or is it more a focus on strategy consulting and orchestration of media and marketing channels.
As data capture, processing and enhancement has accelerated, perhaps the biggest challenge has been, how to extract and interpret the insights. There is now an opportunity to use data to drive and enhance the creative process. For some creatives, bringing data led insight into the mix is an opportunity to create better ideas with additional value for customers. For others, it is a thorn in their side, stifling their progress and limiting their freedom to do what they do.
By the time our Beef treacle shortrib with seven Bro7hers Stout and truffle had been devoured, we’d moved on to discussing agency attitudes in Manchester – and more widely the north of England – and Scotland. From an international buyer perspective, we are often asked for information on “agencies in London”. Some buyers or agents will naturally cite London, but are they missing an opportunity? And are Manchester, Leeds and Glasgow agencies doing enough to foster awareness on an international stage? From a commercial standpoint, northern agencies typically have a significant advantage in the form of a 20-50% lower cost base. Why then, do many northern based agencies not exhibit or aim to surpass the levels of operating profit that their South East based counterparts do? In the north of England and Scotland, we meet agencies all the time that could and arguably should be generating higher profits to reinvest in their staff, service quality and balance sheet.
The next big question of the night? If we are to build upon the fantastic agency scene that exists across the Northern half of the UK, where are the skills going to come from? It is a recurring theme we hear in every city we go to. The “digital skills gap”, the shortage of qualified and experienced staff. Could greater profit fuel a more concerted effort to support younger people coming to work within the creative and tech space? Are agencies aware of and making use of the levy funding available to them that in some cases can fund 90% of the cost of training for their staff?
Discussion continued around people and culture, including local challenges that many attendees were experiencing with retaining staff against competition (in particular, from one large new employer who was in some cases offering up to a 100% premium on salary). Clearly a tempting offer but it brought up the importance of staff engagement and job satisfaction, because many of the staff who had jumped at the salary rise, were then requesting to rejoin their previous agency teams, after experiencing a few months of working within a very different and not altogether positive environment.
As our dinner came to an end, there was unanimous agreement that Northern creative, tech and marketing agencies are making a significant and material contribution to their client’s businesses through strategic partnerships that deliver real value for their customers. At Waypoint, we are making a concerted effort to ensure Northern agencies have a voice within the international buyer community. We share an affinity with our Northern client base and the North has what buyers are looking for, it makes commercial sense…they just might not know it yet.
We’re always interested to hear what topics you would like to see covered at these events. If you would like to attend a future dinner, please send an enquiry to firstname.lastname@example.org.