There’s been a lot of acquisition activity in the last month, but curiously not much money has been changing hands.
This week WPP’s Grey network acquired a digital agency in Singapore that boasted annual revenue of about £0.6 million. Hardly worth the effort, one might suppose. Last week The Engine Group acquired a New York youth marketing agency that employs just 30 people. Publicis, Aegis and Havas have also been on the acquisition trail. And lots more deals were announced without any hard information about their size, but with superficial indications that most of them were small.
So why would big companies be chasing such small fry?
Perhaps they offer something very special in strategic terms – like market or territorial penetration or superior management skills? Or perhaps they help create an impression of an expansive buyer when in reality there is little money available to spend.
Inevitably recessionary conditions will generate seductive opportunities for acquisitive companies to make cheap purchases of businesses that might otherwise be too weak to survive. But unless there is a genuine market advantage in buying a weak business, it is best left alone.
And however much acquisition activity may be going on, whether for good reason or bad, it is worth remembering that most of the really good potential targets will be playing hard to get until the recession is receding and owners can command a better price for their businesses.
So let’s hope that the recent deals are indicative of companies seeking strategic gains with minimal risk to their bank balances. If that is the case, there’s not a lot to lose, and just occasionally there may be a really big strategic benefit to be gained. May a happy and prosperous New Year await those who get it right.
Bob Willott is editor of “Marketing Services Financial Intelligence” at www.fintellect.com