What goes behind mergers, acquisitions & consolidations

In the dynamic landscape of advertising, marketing and media, agencies often find themselves at crossroads, navigating between organic growth and strategic mergers. The journey of agencies like Social Wavelength, now Mirum, Pivotroots and Social Panga exemplifies the complexities and considerations involved in such decisions. 

At the fourth edition of Social Samsoa AgencyCon, industry leaders Gaurav Arora, Co-Founder, of Social Panga, Sanjay Mehta, Advisor & Board Member, of Mirum Agency and Shibu Shivanandan, Founder & MD, PivotRoots got into a discussion on ‘What goes behind mergers, acquisitions and consolidations’. The session was chaired by Hitesh Rajwani, CEO of Social Samosa Network. 

Aquisitions, mergers, consolidations & more... 

Social Wavelength, now known as Mirum, was started in 2009 when mainline agencies lacked the potential of a social media agency and the want for the latter was increasing among clients, Sanjay Mehta pointed out. 

“Within 3-4 years of working, three networks were approaching us for mergers,” he said. While the agency walked away from some of these early approaches, the digital agency was finally acquired by WPP in 2014. 

Mehta mentioned that many people have asked why they chose to merge and not continue to build. 

“We had a choice of not getting acquired and continuing to build, and then in the future looking for a buyer. With WPP, we were getting a guaranteed buyer which made sense to us,” he added. 

While the structure of the deal worked for Sanjay Mehta and his team, Gaurav Arora said, “I never honestly understood the structure.” 

Social Panga was approached by many international agencies, but none from India. Arora added, “We were approached by multiple networks. Everybody had an exit timeline. In our case, the merger made sure we were all founders."

Agreeing with what Mehta said, Shibu Shivanandan said that after a point of time when the agency is making money, it doesn’t remain just about the valuation but becomes time-specific. 

He said, “We saw the same mindset in Havas with a similar culture. It's all about what stage you are in and what you are looking for in 5 years.”

Factors independent agencies should keep in mind

Shivanandan pointed out three important factors to keep in mind for independent agencies when they are looking at mergers and consolidations. 

He said, "The most important is understanding the culture. Second part, are we complementing services with partner agencies? Third, what's the hunger of the network to grow?"

Mehta mentioned that a lot of the buyers today network and global agencies and go through multiple rounds of work, and the acquisition process at the end takes forever to close. 

He added, “With large companies, as you look for chemistry, unfortunately, a lot of decisions are driven by global networks. Thus, let's be candid with ourselves. You are giving up your own business, so it better be for good money. This needs to be the driver."

Arora said, "It's as simple as Shark Tank if your numbers are bad but a good brand, your numbers are still bad. What they look at is your balance sheet." 

Arora further spoke about the current scenario where he mentioned more networks and other entities coming in for acquisitions. He said that agencies need to have a clear value proposition and make sure the numbers are intact. 

Balance between your vision and the group’s

To strike the right balance, Arora mentioned that their group focuses on team growth. 

He said, “It's always the group first. If the group at large grows, we grow." Adding to this, he further said that unlike in networks, where agencies are given targets, for them, the group at large grows. 

Mehta mentioned that for any agency, their priorities do change, whether it be a network agency or otherwise and it isn’t in your hands. He added, “Like any other business, acquisitions are also about supply and demand. In this case, it of a niche kind of offering.”

Further building on this thought, Shivanandan said, “When entering a group, the one single focus is growth. How you get to that point is what you have to figure out. If you’re able to find and carve this segment within the network, you will find the balance.” 

In the ever-evolving landscape of agency acquisitions and mergers, key considerations such as cultural alignment, service synergy, growth prospects, financial stability, and group dynamics emerge as guiding principles. As agencies navigate the complexities of consolidation, the insights shared by industry veterans underscore the importance of strategic decision-making and alignment with overarching goals. 

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