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Digital Agency Landscape I August 2015 I page 1Strictly private and confidential
Paris office
T: +33 1 48 24 63 00
F: +33 ...
Digital Agency Landscape I August 2015 I page 2Strictly private and confidential
TEAM
Independence
Client focused and comm...
Digital Agency Landscape I August 2015 I page 3Strictly private and confidential
CAPITALMIND
MARKET LANDSCAPE
TRANSACTIONS...
Digital Agency Landscape I August 2015 I page 4Strictly private and confidential
PRODUCTSERVICES
DUTCH MARKET LANDSCAPE
In...
Digital Agency Landscape I August 2015 I page 5Strictly private and confidential
REVENUE GROWTH AND PROFITS VARY SIGNIFICA...
Digital Agency Landscape I August 2015 I page 6Strictly private and confidential
CAPITALMIND
MARKET LANDSCAPE
TRANSACTIONS...
Digital Agency Landscape I August 2015 I page 7Strictly private and confidential
WORLDWIDE TRANSACTION ACTIVITY PER COUNTR...
Digital Agency Landscape I August 2015 I page 8Strictly private and confidential
EUROPEAN ACTIVITY PER COUNTRY
Numbers are...
Digital Agency Landscape I August 2015 I page 9Strictly private and confidential
ACTIVITY PER SUB-SEGMENT
Most wanted targ...
Digital Agency Landscape I August 2015 I page 10Strictly private and confidential
DIGITAL MARKETING
Deal activity in the s...
Digital Agency Landscape I August 2015 I page 11Strictly private and confidential
CAPITALMIND
MARKET LANDSCAPE
TRANSACTION...
Digital Agency Landscape I August 2015 I page 12Strictly private and confidential
TRADING MULTIPLES
Trading multiples
The ...
Digital Agency Landscape I August 2015 I page 13Strictly private and confidential
TYPICAL DEAL STRUCTURE FOR LOCAL PLAYERS...
Digital Agency Landscape I August 2015 I page 14Strictly private and confidential
TYPICAL DEAL STRUCTURE FOR LARGER TARGET...
Digital Agency Landscape I August 2015 I page 15Strictly private and confidential
CAPITALMIND
MARKET LANDSCAPE
TRANSACTION...
Digital Agency Landscape I August 2015 I page 16Strictly private and confidential
MAIN INDUSTRY BUYERS
Digital Agency Landscape I August 2015 I page 17Strictly private and confidential
ALTERNATIVE INDUSTRY BUYERS
Alternative ...
Digital Agency Landscape I August 2015 I page 18Strictly private and confidential
CAPITALMIND
MARKET LANDSCAPE
TRANSACTION...
Digital Agency Landscape I August 2015 I page 19Strictly private and confidential
INDUSTRY TRACK RECORD (1/3)
A strong ind...
Digital Agency Landscape I August 2015 I page 20Strictly private and confidential
INDUSTRY TRACK RECORD (2/3)
A strong ind...
Digital Agency Landscape I August 2015 I page 21Strictly private and confidential
INDUSTRY TRACK RECORD (3/3)
A strong ind...
Digital Agency Landscape I August 2015 I page 22Strictly private and confidential
Award winning international corporate fi...
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The Dutch Digital agencies landscape

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We have mapped out the Dutch digital media agencies in a M&A perspective. Who is buying these sort of companies and what are they paying?

Published in: Economy & Finance
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The Dutch Digital agencies landscape

  1. 1. Digital Agency Landscape I August 2015 I page 1Strictly private and confidential Paris office T: +33 1 48 24 63 00 F: +33 1 48 24 63 02 62 rue La Boétie 75008 Paris, FRANCE Pim Mulder Analyst pim.mulder@capitalmind.com ’s-Hertogenbosch office T: +31 (0)73 – 623 87 74 F: +31 (0)73 – 623 87 75 Europalaan 6 5232 BC ’s-Hertogenbosch THE NETHERLANDS Ron Belt Managing Partner ron.belt@capitalmind.com Denmark office T +45 20 433 373 Lyngsø Alle 3 2970 Hoersholm, DENMARK European Mid-Market Corporate Finance Advisory BENELUX │ FRANCE │ NORDICS | INTERNATIONAL Paris – ‘s-Hertogenbosch – Amsterdam - Copenhagen Digital Agency Landscape
  2. 2. Digital Agency Landscape I August 2015 I page 2Strictly private and confidential TEAM Independence Client focused and commitment Quality and professional Smart and pragmatic solutions Straight-forward advice Our values Highly experienced and committed European team, strong of 30 professionals 30 experienced professionals, located across 4 offices in Europe France : Paris Benelux : ‘s-Hertogenbosch, Hilversum (Amsterdam) Nordics: Copenhagen
  3. 3. Digital Agency Landscape I August 2015 I page 3Strictly private and confidential CAPITALMIND MARKET LANDSCAPE TRANSACTIONS TRADING MULTIPLES INDUSTRY BUYERS INDUSTRY EXPERIENCE
  4. 4. Digital Agency Landscape I August 2015 I page 4Strictly private and confidential PRODUCTSERVICES DUTCH MARKET LANDSCAPE Internetbureaus / digital agencies (Internetbureau) Online campagne Payment systems E-mail marketing agencies CMS Software CMS Open Source Internetsecurity, Verification, Privacy IT-software and - hardware System integrator & Consultancy Mobile AgenciesSocial Agencies and software Result driven marketing & advertising Media Exploitation Search marketing agencies Marketing & ebusiness Consultants Web statistics & Site- optimalisatie software Web statistics & optimalisatie Email Software Development Comparisors Media agencies Affiliate Network Marketing data Software
  5. 5. Digital Agency Landscape I August 2015 I page 5Strictly private and confidential REVENUE GROWTH AND PROFITS VARY SIGNIFICANTLY Newer, more specialized offerings are more profitable * Source: www.dutchdigitalagencies.nl The general digital agency segment contains more larger companies but is more developed – Lower margins – More expensive staff – Pricing varies with the state of the economy Specialists can (still) make better margins – Younger markets hence better pricing – Staff is relatively young and therefore cheap Market development The market / staff play In the Netherlands, the online industry remains one of the biggest growth markets within the Dutch Creative Industry. Revenue in 2014 increased with 11% and for 2015 growth is expected to accelerate to grow with 21% 2015. The average project size in 2014 increased with 7% from 2013 and even with 59% compared to 2011. Employment within the sector increased with 11% in 2014, up from 8% in 2013. A survey among 84 members from the DDA revealed that these member, together generating €381 million in revenues (average revenue of € 4,5 million), reached an average profit of around 10%. 260.2 307.8 344.6 381 0 50 100 150 200 250 300 350 400 450 2011 2012 2013 2014 Revenuein€mln Year CAGR2011-2014: 13,6% 14/13 13/12 2014 2013 2012 2014 2013 2012 Digital agencies 9,2% -1,5% 14,3% 12,6% 13,1% 99,6€ 90,8€ 100,6€ SEO/A specialists 20,4% 17,7% 33,5% 30,0% 26,0% 98,2€ 95,9€ 87,4€ Revenue growth EBIT margin (AVG) Rev. / empl. (x1000)
  6. 6. Digital Agency Landscape I August 2015 I page 6Strictly private and confidential CAPITALMIND MARKET LANDSCAPE TRANSACTIONS TRADING MULTIPLES INDUSTRY BUYERS INDUSTRY EXPERIENCE
  7. 7. Digital Agency Landscape I August 2015 I page 7Strictly private and confidential WORLDWIDE TRANSACTION ACTIVITY PER COUNTRY Analysed over 600 transactions up from 2006, we see most target companies in this sector are European companies, followed by US companies. A major increase in deal activity has been noticed in Brazil and South Africa over the last couple of years. Digital agency transaction activity
  8. 8. Digital Agency Landscape I August 2015 I page 8Strictly private and confidential EUROPEAN ACTIVITY PER COUNTRY Numbers are proving that digital agency deal activity runs at a strong pace. Europe counts for 41% of the deals through 2006 – 2015. Digital agency activity Of all the transaction in this sector, 41,46% of the deals involved European targets. Especially in the UK, France, Germany and the Netherlands (!) activity has been noticed. Up from the year 2012, Netherlands has always been in the Top 3 European countries in terms of target companies. The Big 4 advertisement companies are main buyers in this sector, counting for 61% of all the deals (worldwide). From the Big 4, WPP by far has been the most acquisitive party. Worth to notice is also the substantial percentage of transaction, 17%, in which neither a Big 4 company nor Dentsu Inc. has been the buyer. 32% 4% 19% 22% 6% 17% Transactions by acquirer (Worldwide) WPP Plc Interpublic Group of Companies Dentsu Inc. Publicis Groupe Omnicom Group Other 2006 2009 2012 20150 5 10 15 20 25 Transactions per country per year (Europe)
  9. 9. Digital Agency Landscape I August 2015 I page 9Strictly private and confidential ACTIVITY PER SUB-SEGMENT Most wanted targets, based on key activity, turned out to be digital marketing agencies. In addition, web agencies and advertisement companies have been popular targets. Digital agency activity 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 0 5 10 15 20 25 30 35 Key activity by target by year
  10. 10. Digital Agency Landscape I August 2015 I page 10Strictly private and confidential DIGITAL MARKETING Deal activity in the sector is increasing, the overview below provides Benelux transactions. Capitalmind advised on several deals, the most recent one being the merger between DQ&A and Incubeta. Deals by Capitalmind WPP Publicis Groupe Omnicom Group Dentsu Interpublic Group Other
  11. 11. Digital Agency Landscape I August 2015 I page 11Strictly private and confidential CAPITALMIND MARKET LANDSCAPE TRANSACTIONS TRADING MULTIPLES INDUSTRY BUYERS INDUSTRY EXPERIENCE
  12. 12. Digital Agency Landscape I August 2015 I page 12Strictly private and confidential TRADING MULTIPLES Trading multiples The overview below provides an overview of current trading multiples of the main Advertising Holding companies Trading multiples The trading multiples method is based on recent Market Cap valuations of listed companies in the market. Most of the times a discount is used for mid-market companies. The main reason therefore is a difference in risk comparing with larger, listed companies and less liquidity of shares. On average a 20% discount is realistic when used for valuing mid-market companies. Company Date Market Cap Enterprise Value (EV) EV / Revenue EV / EBITDA WPP plc (WPPGY) 20-Oct 28,82 $billion 33,88 $billion 1,84x 9,59x Omnicom Group Inc. (OMC) 20-Oct 17,55 $billion 20,71 $billion 1,36x 9,26x Publicis Groupe SA (PUB.PA) 20-Oct 13,25 €billion 16,05 €billion 1,90x 10,37x The Interpublic Group of Companies, Inc. (IPG) 20-Oct 8,78 $billion 10,15 $billion 1,34x 10,27x Havas (HAV.PA) 20-Oct 3,21 €billion 3,30 €billion 1,62x 10,02x
  13. 13. Digital Agency Landscape I August 2015 I page 13Strictly private and confidential TYPICAL DEAL STRUCTURE FOR LOCAL PLAYERS The buyers all use more or less the same deal structure for smaller ‘local’ acquisitions.. Long earn-out periods for ‘local’ players of limited size TRANSACTION Year Ending December 31st 2015 2016 2017 2018 2019 2020 Net profit 2.070 2.381 2.559 2.733 2.916 Multiple 7,00x 7,50x 7,50x 7,50x 7,50x Implied Value 14.490 17.854 19.193 20.495 21.867 % of Value Paid 60,0% 70,0% 80,0% 90,0% 100,0% Payment Potential Value 8.694 12.498 15.354 18.445 21.867 -/- already paid -3.250 -12.498 -15.354 -18.445 To pay in this year 3.250 9.248 2.857 3.091 3.422 Total 21.867 (of which earned by the company) 15.474 (EUR in 000) INCOME STATEMENT SAMPLE BV Year Ending December 31st 2014A 2015E 2016E 2017E 2018E 2019E 2020E Revenue 7.200 8.280 9.522 10.950 12.319 13.859 15.245 Growth 15,0% 15,0% 15,0% 12,5% 12,5% 10,0% Net profit 1.800 2.070 2.381 2.738 3.080 3.465 3.811 Margin 25,0% 25,0% 25,0% 25,0% 25,0% 25,0% 25,0% <5% >5%<10% >10%<15% >15%<20% >20%<25% >25% <7.5% 5,00x 5,00x 5,25x 5,50x 5,50x 5,75x ≥7.5% and <15%5,25x 5,50x 6,00x 6,25x 6,50x 6,75x ≥15% and <25%5,50x 6,00x 6,50x 7,00x 7,50x 8,00x ≥25% 6,50x 7,00x 7,50x 8,00x 8,50x 9,00x CAGR Growth rate Margin
  14. 14. Digital Agency Landscape I August 2015 I page 14Strictly private and confidential TYPICAL DEAL STRUCTURE FOR LARGER TARGETS … but they tend to deviate if the targets is larger / international Long earn-out periods for ‘local’ players of limited size - For larger, ‘strategic’ assets pricing is substantial higher - The price compared to own trading multiples is explained using (cost) synergies 0.0 5.0 10.0 15.0 20.0 25.0 30.0 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% Multiples, Margins & Size 0.0 5.0 10.0 15.0 20.0 25.0 30.0 EBITDA Multiples
  15. 15. Digital Agency Landscape I August 2015 I page 15Strictly private and confidential CAPITALMIND MARKET LANDSCAPE TRANSACTIONS TRADING MULTIPLES INDUSTRY BUYERS INDUSTRY EXPERIENCE
  16. 16. Digital Agency Landscape I August 2015 I page 16Strictly private and confidential MAIN INDUSTRY BUYERS
  17. 17. Digital Agency Landscape I August 2015 I page 17Strictly private and confidential ALTERNATIVE INDUSTRY BUYERS Alternative buyers So the main big buyers in this industry are the 5 biggest Advertising holding companies. What we’ve seen before too though, is that these are not the only buyers in the industry, especially within the last years. Who are these other the buyers (17% of the buyers)? Customers nowadays can move to a competitor more quickly and easily than ever and many products are becoming price-driven goods. This means that customer experience is becoming vital to retain customers and companies with best customer experience will be winners. Digital agencies manage and create customer experience, this is where the interest from ‘alternative’ buyers for digital agencies begins. Secondly, customers are becoming more independent, meaning they investigate more their selves and they are buying products later on in the sales cycle. Again, companies that can control the (online) sales funnel, digital agencies, are becoming increasingly important. Analysing this group of alternative buyers, we see increasing interest in digital agencies from: (i) IT services / consulting companies, (ii) Adtech companies, (iii) Big data companies, (iv) Large software companies and (v) ‘other’ IT companies. Besides, advertising companies who don’t have a digital department yet are buyers, as digital will play an important role in the future of the industry. Aside from Havas, also within this 17% group (17,3%), over the last couple of years several ‘alternative’ buyers have blend themselves into the world of digital agencies. Recently, IT Service company Cognizant bought interactive marketing firm Cadient, Ensighten acquired marketing analytics firm Anametrix and Alliance Data has acquired Conversant, a digital marketer. And these are just some of the examples. Source: http://venturebeat.com/2014/11/13/why-digital-marketing-companies-have-become-tasty-acquisitions/; http://adage.com/article/digital/datacenter-agency-report-2015-charts/298214/; Headwaters Internet Advertisement update 2014Q2 … Alternative example buyers IT Services / Consulting companies Adtech companies Big data companies Large software companies IT Other
  18. 18. Digital Agency Landscape I August 2015 I page 18Strictly private and confidential CAPITALMIND MARKET LANDSCAPE TRANSACTIONS TRADING MULTIPLES INDUSTRY BUYERS INDUSTRY EXPERIENCE
  19. 19. Digital Agency Landscape I August 2015 I page 19Strictly private and confidential INDUSTRY TRACK RECORD (1/3) A strong industry experience Expand Online has merged with Tam Tam. Expand Online is an online marketing agency specialised in optimised online campaigns via search engine marketing, display and web analytics. Tam Tam is a full service digital agency. DQ&A Media Group merged with IncuBeta. DQ&A Media Group is a highly innovative specialist in digital advertising technologies. IncuBeta is a global leading provider of digital advertising services and media solutions. Social1nfluencers has been partly sold to SBS/Sanoma. Social1nfluencers is a network of popular videographers, especially among teenagers IPG Mediabrands owned by US based Interpublic Group acquired Traffic4U. Traffic4U is a digital marketing agency focused on search engine optimization, search advertising and conversion rate with a market leading position in the Netherlands
  20. 20. Digital Agency Landscape I August 2015 I page 20Strictly private and confidential INDUSTRY TRACK RECORD (2/3) A strong industry experience Tiin Capital and PPM Oost invested in Informaat CXP. Informaat CXP will use these funds to further develop CXP and to roll-out the company internationally. Informaat CXP is a Customer Experience Platform that allows companies to service customers across all possible touch points. IPG Mediabrands owned by US based Interpublic Group acquired bGenius. bGenius is a bid management software company servicing online marketers to optimize and manage campaigns in different search engines in one system. PPM Oost invested in Service2Media. This investment will strengthen Service2Media’s position and help to expand their business. It will be used by Service2Media’s R&D team to bring the App Lifecycle Platform™ – M2Active to the next level. Service2Media is a developer of a (mobile)app platform allowing creation and running of (mobile) apps. Netsociety is acquired by Aegis Media, the UK communication and media company. Aegis will integrate Netsociety with its Dutch based subsidiary iProspect, provider of leading digital performance marketing solutions. Netsociety is a leading Dutch online media company.
  21. 21. Digital Agency Landscape I August 2015 I page 21Strictly private and confidential INDUSTRY TRACK RECORD (3/3) A strong industry experience IceMobile merged with Brandloyalty, the globally active, leading consumer loyalty company. Icemobile is a developer of mobile applications, including leading brand applications for Ahold (Appie) and ABN AMRO, and Sara Lee (Douwe Egberts). Videostrip is acquired by RTL Nederland, the Dutch subsidiary of leading European audiovisual group. Videostrip’s technology and relationships with advertisers enables RTL to monetize its premium content online. Videostrip is the largest Dutch multimedia video advertising network. Cleafs was acquired by Affilinet, the leading European affiliate network active in 7 countries in Europe, serving over 2000 affiliate programs. Affilinet is part of German listed United Internet AG. Cleafs is the leading affiliate advertising network in the Netherlands, specialized in travel, ticketing, parking, living and fashion. Private Plus Fund (Newion Investments) and PTV invested in Service2Media. Service2Media is a developer of a (mobile)app platform allowing creation and running of (mobile) apps.
  22. 22. Digital Agency Landscape I August 2015 I page 22Strictly private and confidential Award winning international corporate finance advice Germany India Italy Japan Mexico Poland Russia Singapore South Africa Spain Sweden Thailand Turkey UK USA Australia Benelux Brazil Canada China Columbia France FRANCE BENELUX NORDICS Paris 62, rue la Boétie 75008 Paris France T +33 (0)14 824 63 00 ‘s-Hertogenbosch Europalaan 6 5232 BC ‘s-Hertogenbosch The Netherlands T +31(0)73 623 87 74 Amsterdam Vreelandseweg 7 1216 CG Hilversum The Netherlands T +31 (0)35 624 43 41 Copenhagen Lyngsø Alle 3 2970 Hoersholm Denmark T +45 20 433 373

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