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Electrify investment memorandum v3m

Electrify is a brand engagement agency seeking £200k total investment. The funds would provide marketing and working capital to support longer sales cycles. Electrify designs integrated campaigns using live brand experiences, social media, and content to drive advocacy. Their clients include major brands in electronics, FMCG, finance, and online sectors. Forecasts estimate £1.49-1.93m in revenue and 15-23% net margins for the remainder of 2013, growing to £1.73-3m revenue and 15-28% net margins in 2014.

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Electrify Worldwide Ltd Investment Memorandum 4th June 2013
A. INTRO/EXECUTIVE SUMMARY
A. INTRO/EXECUTIVE SUMMARY 1. Business Summary Electrify is a brand engagement agency, for the new era of „experience brands‟. For brands that know that how they behave, is even more important than what they say. By leveraging offline 'live brand experiences' and events online, through social media content and engagement - we generate real world „social currency‟, personal recommendations, and maximum reach. We are accountability and ROI driven, always measuring the tangible business impact of what we do.
A. INTRO/EXECUTIVE SUMMARY 2. Proposed Financing • £200k total investment required
• Reputable, highly competent and widely recognised senior management team. • CEO, ShazSmilansky is a world renowned author of book „Experiential Marketing a practical guide to interactive brand experiences‟, who also co-developed a Master‟s degree at London Metropolitan University: Digital Meets Experiential. • Agency has proprietary IP processes (BETTER brainstorm, and SETMESSAGE planning systems amongst others) relating to creative idea generation, strategic planning, campaign execution and evaluation. These remove emphasis on talent (and therefore keeps operation low risk and highly scalable), as clients „buy into‟ agency methodologies - rather than just individuals within client service team. Thus negating key common downsides to a „people business‟. • Branded engagement, experiences and content are incredibly high-growth and topical focuses for brands within their marketing mix, and play increasingly key roles in the success of brands‟ social media and mobile programs. • The agency pitch team regularly win business against rival „experiential agencies‟ who have billings in excess of £10m p/a. • Blue-chip client roster already exists, opportunities to grow those accounts substantially, is enormous. • Agency has implemented systems and processes, as well as agency wide compliance of a A. INTRO/EXECUTIVE SUMMARY 3. Pros of the Investment/Reasons to Invest
A. INTRO/EXECUTIVE SUMMARY • Long sales cycles required to sell to senior decision makers in blue-chip brands, often sales cycles can span 2-6 months, impacting cashflow. • Clients often leaving their roles (moving to other brands); heightens need to network broadly within the company‟s marketing department. 4. Cons/Key Risks
A. INTRO/EXECUTIVE SUMMARY Sales and net profit forecasts for May till December 2013 (8months) are below: 4. Deal Goals – Use of Proceeds Revenue 8 Months Net Margin Conservativ e £1,294,1 48 15% Reasonable £1,493,6 48 18% Positive £1,929,6 47 23% Sales and net profit forecasts for January till December 2014 (12 months) are below: Revenue 12 Months Net Margin Conservativ e £1,729,0 00 15% Reasonable £2,128,0 00 20% Positive £3,000,0 00 28% To provide a budget for business development focused marketing, and working capital to allow for the „longer sales cycles‟.
B. MARKET OPPORTUNITY
B. MARKET OPPORTUNITY The marketing and advertising industry is growing in the UK and globally - despite recession reports. „Engagement‟ continues to be considered highest on priority lists for brands and „content‟ is the biggest buzz word of the moment, and its popularity is going nowhere - with it being pinned at the most topical area for future growth in coming years. Live brand experiences and events are well known to be prime sources for both consumer engagement and digital content. Logical, bearing in mind a real life experience is clearly more engaging and authentic than a pre-engineered traditional advertisement. Results International have 21 years of experience and over 200 deals completed, they are the market leader in providing corporate finance and consulting advice to Marketing Communications companies. According to Results International: “Experiential has found its way to the heart of the marketing mix. The agencies that will succeed in this arena are those that can match their experiential expertise with digital technology and social media creating brand engagement. Social media-ready brand experiences that transcend live and digital domains are the future.” 1A. The Market
The Advertising Association and Warc's quarterly Expenditure Report (UK) forecasts growth of 2.7 per cent this year and 5 per cent in 2014, and sites that Adspend grew 2.3 per cent year on year to reach £17.2 billion in 2012. Global ad spending grew by 3.2% last year, but some sectors fared better than others, details Nielsen. Econsultancy's first Content Marketing Survey Report, sponsored by Outbrain, is based on a survey of more than 1,300 marketers working for brands, agencies, and publishers. It shows: Increased engagement is the most commonly cited objective for content marketers, with 52% of in-house marketers and 58% of agency marketers listing this as one of their top three business objectives. Over 90% of respondents believe that content marketing will become more important over the next 12 months. In the 2013 Market survey report, Ad Media Partners asked senior executives in leading content and marketing services companies “For services firms, is your company considering expanding or acquiring any of the following services businesses?” „Experiential Marketing was selected 32% of the time, Social Marketing was selected 64% of the time, and Mobile Marketing was selected 67% of the time‟. 1B. Key Stats Below: B. MARKET OPPORTUNITY
The landscape for „experiential marketing agencies‟ is comprised of a variety of agencies who offer a varying scope of services, ranging from tactical promotional staffing agencies, to event agencies and more content and engagement driven agencies such as Electrify. However, there are few who focus on and harness a strategic proposition or effectively offer auxiliary services which strengthen and leverage the power of an event or live experience as branded content. Agencies vary from independents to those owned by groups, though true global players with a proposition aimed at C-Suite brand executives are limited. Future competition is likely to come from strengthened offerings provided by larger agencies buying smaller ones. 2. Competition: B. MARKET OPPORTUNITY
C. SERVICES
C. SERVICES We design integrated marketing communications that are content driven, and built around live brand experiences. We offer brand strategy, creative thinking, and create long-term brand platforms that drive brand advocacy and ultimately evangelism. Prospects and clients are Marketing Directors, CMO‟s, VP‟s of Marketing, Brand Managers, Marketing Managers, Heads of Brand Engagement, Heads of Social Media
GLOBAL BRAND STRATEGY C. SERVICES
LIVE BRAND EXPERIENCES C. SERVICES
SOCIAL MEDIA & APPS C. SERVICES
VIDEO PRODUCTION C. SERVICES
PROMOTIONAL MARKETING C. SERVICES
EVENTS C. SERVICES
POP UP SHOPS & EVENTS C. SERVICES
PR STUNTS C. SERVICES
IMMERSIVE THEATRE C. SERVICES
BRANDED INSTALLATIONS C. SERVICES
CONSUMER ADVOCACY PROGRAMS C. SERVICES
D. SALES/MARKETING STRATEGY
Current Clients Include: D. SALES/MARKETING STRATEGY
D. SALES/MARKETING STRATEGY 1. Our ideal customers which we are targeting with our business development and marketing initiatives, are as previously mentioned; CMO‟s, Marketing Directors, Senior Brand Managers, Brand Managers, Marketing Managers, Heads of Marketing, Heads of Social Media at major blue-chip brands. We have a primary focus on the following sectors: Electronics, FMCG, Alcohol, Finance, and Online brands. We can reach our audience via a number of channels such as creating thought leadership and social events, and meeting them at networking events and speaking opportunities. We also have a secondary strategy to gain introductions (not white-label) which is to complete projects through media, digital and creative agencies. 1. The cost to acquire a client varies greatly depending on a number of factors, we have designed a diagram demonstrating an overview to our sales and marketing strategy below.
3A.
The sales process tends to take around 3 months on average, to take a prospect through the pipeline, though the range is broad; varying between 1 month and 1 year. It then takes an average of 6 weeks to implement a project following its sign off, and around 4 weeks following on from project completion in order to extract another brief from the client. 3B.
D. SALES/MARKETING STRATEGY 4. Major customers are aforementioned, with the addition of some other media agency partners. Case studies of past projects can be found as an appendix. Historic spend and forecasted spend (aligned with „Reasonable‟ middle tier forecasts) are broken down in the following table.
D. SALES/MARKETING STRATEGY Client BS 2011 BS 2012 BS 2013 Electrify 2013 Electrify 2014 Spend Spend Spend Spend Forecast* Forecast** LOVEFiLM £50,000.00 £429,000.00£50,000.00 £0.00 £60,000.00 £100,000.00 Amazon £0.00 £0.00 £0.00 £0.00 £120,000.00 £350,000.00 General Mills £150,000.0 0 £0.00 £10,000.00£266,859.0 0 £332,000.00 £350,000.00 Casio £0.00 £83,000.00 £58,000.00 £0.00 £110,000.00 £110,000.00 Symantec £0.00 £60,000.00 £104,000.0 0 £0.00 £0.00 £125,000.00 Nationwide £0.00 £0.00 £27,000.00£24,274.00£200,000.00 £250,000.00 Zurich £0.00 £0.00 £49,000.00 £0.00 £75,000.00 £250,000.00 BrownForman*** £0.00 £250,000.00 £0.00 £0.00 £100,000.00 £300,000.00 L’Oreal £0.00 £30,000.00 £0.00 £0.00 £85,000.00 £250,000.00 MSM £0.00 £0.00 £25,000.00 £0.00 £75,000.00 £200,000.00 Fitness First £0.00 £0.00 £70,000.00 £0.00 £15,000.00 £70,000.00 Paddy Power £0.00 £0.00 £5,000.00 £0.00 £20,000.00 £75,000.00 Total £200,000.00 £852,000.00 £398,000.00 £291,133.00 £1,192,000.00 £2,430,000.00 Media Agency Spend Spend Spend Spend Forecast* Forecast Rapport (Yoplait+) £0.00 £0.00 £123,000.0 0 £210,207.0 0 £229,000.00 £370,000.00 Talon £0.00 £0.00 £0.00 £0.00 £50,000.00 £100,000.00 Kinetic £657,396.0 0 £344,449.00£11,200.00£48,307.00£109,000.00 £100,000.00 Total £0.00 £344,449.00 £134,200.00 £258,514.00 £388,000.00 £570,000.00 Combined Total £857,396.00 £1,196,449.00 £532,200.00 £549,647.00 £1,580,000.00 £3,000,000.00 Reasonable Target n/a n/a n/a £1,929,647. 00 % of Target Existing Client Target n/a n/a n/a £1,580,000. 00 82 New Biz n/a n/a n/a £349,647.00 18 Historically, LOVEFiLM have been able to determine their own marketing spend and behaviour, however, now that Amazon have started to play a much more assertive role in the business, marketing spends are subject to another level of sign off. Amazon are very traditional in their way of thinking, as such spend with LOVEFiLM is subject to a decrease from last year. We are aiming to infiltrate and prove that our channel can produce quantifiable results for Amazon, with the aim of building a strong long term relationship. Brown Forman: in 2012 we were tasked with creating and project managing the renowned JD Barrel Tree, this represented a high spend through our channel. The decision was taken this year was to not repeat this activity, however there are indications that it may reappear in 2014. The aim is to infiltrate via our know contacts and generate new opps and briefs aside from the Barrel Tree. *This is the combined total of current spend and forecasted spend for 2013 **Please note that all 2014 forecasts are just that *** We are classing BF as a direct client, as this is now the case
D. SALES/MARKETING STRATEGY 5. High Level P&L Under Different Scenarios for 2013 (8 months) and 2014 OVERHEADS (not inc. direct) Category 8 Months Personell £341,003 Marketing £30,660 Admin £31,383 Office Facilities (inc rates) £55,890 Finance £23,336 £482,272 2013 (MAY-DEC 8months) Revenue 8 Months Direct Costs Overheads (inc. direct) Net Profit Conservative £1,294,148 £592,913 £1,075,185 £218,963 Reasonable £1,493,648 £672,713 £1,154,985 £338,663 Positive £1,929,647 £847,112 £1,329,384 £600,263 BONUS SCHEME Revenue 8 Months % of Salaries Profit Bonus Pool Net Profit After Bonus Net Margin Conservative £1,294,148 10% £218,963.00 £29,982.00 £188,981.00 15% Reasonable £1,493,648 25% £338,663.00 £74,956.00 £263,707.00 18% Positive £1,929,647 50% £600,263.00 £149,912.00 £450,351.00 23%
D. SALES/MARKETING STRATEGY 2014 Annual 12 Months OVERHEADS (not inc. direct) Category Annual Personell £512,047 Marketing £48,000 Admin £46,560 Office Facilities (inc rates) £96,020 Finance £35,000 £737,627 Revenue Annual Direct Costs (40%) Overheads (inc. direct) Net Profit Conservative £1,729,000 £691,600 £1,429,227 £299,773 Reasonable £2,128,000 £851,200 £1,588,827 £539,173 Positive £3,000,000 £1,200,000 £1,937,627 £1,062,373 BONUS SCHEME Revenue % of Salaries Profit Bonus Pool Net Profit After Bonus Net Margin Conservative £1,729,000 10% £299,773.00 £45,044.00 £254,729 15% Reasonable £2,128,000 25% £539,173.00 £112,609.00 £426,564 20% Positive £3,000,000 50% £1,062,373.00 £225,218.00 £837,155 28%
D. SALES/MARKETING STRATEGY 6. A breakdown of spend associated with our proposed business development / marketing tactics is below. These activities have been tried and tested as effective in the past and will be important in Electrify‟s customer acquisition plans CHANNEL ACTIVITIES Q2 Q3 Q4 MAY JUNE JULY AUGUST SEPT OCT NOV DEC OPPORTUNITY SOURCING Individual, tailored emails (insight driven) Telemarketing follow up calls (after emails) £1,000.00 £1,000.00 £1,000.00 £1,000.00 £1,000.00 £1,000.00 Intermediaries (AAR etc) Partnerships / JV's (Agency relationships) WEB /BRAND PRESENCE SEO £150.00 £150.00 £150.00 £150.00 £150.00 £150.00 £150.00 £150.00 Website (Programming updates) £200.00 £25.00 £25.00 £25.00 Website & Branding (Design / branding) £1,250.00 Tumblr Blog Twitter Linked In Group Instagram Other Social Media Office Signage £750.00 SCHMOOZING CRM LIST Drinks events - inviting prospects and dormant clients £500.00 £1,250.00 Lunches - inviting prospects and dormant clients £550.00 £550.00 £550.00 £550.00 £550.00 £550.00 £350.00 £500.00 Gifts - birthdays, new jobs, xmas, other holidays £100.00 £100.00 £100.00 £100.00 £100.00 £250.00 Launch party £500.00 EXPERT EVENTS Speaking opportunities - contacting all event organisers Seminars - hosting them £1,000.00 £1,000.00 Roundtable dinners - hosting them £800.00 £800.00
D. SALES/MARKETING STRATEGY Channel Activities MAY JUNE JULY AUG SEPT OCT NOV DEC CONTENT PARTNERSHIPS Research Whitepaper Slideshare Infographics Videos £100.00 Articles Research Launch Event £875.00 Capture page £50.00 CREDIBILITY Awards - entering PR (online + offline) £525.00 £525.00 £525.00 £525.00 £525.00 £525.00 £525.00 £525.00 League tables NETWORKING Networking Events Marketing Society £430.00 £100.00 £100.00 £380.00 £200.00 £200.00 £200.00 Industry Launches SEGMENTED E-SHOTS Newsletter (HTML) £70.00 £70.00 £70.00 £70.00 £70.00 £70.00 £70.00 £70.00 Personal emails (text) Data £500.00 £500.00 £500.00 DM Post items (showreel, books +) Direct response postal letters £340.00 £600.00 £600.00 £4,420.00 £4,965.00 £4,195.00 £2,520.00 £5,175.00 £3,620.00 £2,295.00 £3,470.00 6. Continued Q2 Q3 Q4
E. SENIOR MANAGEMENT TEAM
CEO & Exec. Creative Director, and Partner A marketer, writer, strategist, creative, visiting professor and entrepreneur – Smilansky is a recognised star in the marketing field. Shaz is Visiting Professor at the London Metropolitan University, has co-develop the first Masters degree on Experiential Marketing in the UK „Digital Meets Experiential‟. She sits on the board of the World Brand Congress 2013, has been a regular guest speaker on BBC radio (Wake up to Money, and BBC Radio 5 Live). Shaz is also the only UK author to have released a book on Experiential Marketing, her book titled „Experiential Marketing, a practical guide to interactive brand experiences‟ is sold in international markets. The book is published by Kogan Page, Europe‟s leading independent business publisher. Shaz regularly flies around the globe to speak at industry events, and teach reputable agencies and high profile brands the Experiential Marketing methodology that she speaks about in her book. Shaz often hosts workshops which focus on the relationship between live brand experiences and social media, as well as how ShazSmilansky E. SENIOR MANAGEMENT TEAM
Financial & Commercial Director, and Partner David is a multi-discipline Financial Accountant with over ten years‟ experience within the within the marketing and PR industry; a dedicated and enthusiastic professional with extensive financial and general business management experience. David develops and implements the production of financial and management information, leads on creating a culture of commercial awareness within the agency, and oversees negotiations and volume deal arrangements to achieve cost efficiencies with suppliers. Prior to joining the team, David was at Hills Balfour Ltd – The UK‟s leading Marketing and PR company in the travel & tourism industry, there he was responsible for the Finance, IT, HR and Office management departments, and grew the company turnover to over £5m and over 50 staff with 3 subsidiary companies. David Shobanjo E. SENIOR MANAGEMENT TEAM
Strategy & Business Development Director, and Partner After graduating with a Master‟s degree with Merit in Events Marketing and Management, Iain has risen within the world of Marketing at an accelerated pace as Strategy & Business Development Director, and partner to lead Electrify‟s new business and marketing machine whilst maintaining overall responsibility for the agency‟s strategic output. By leading on outstanding sales processes, pitches and proposals Iain has successfully acquired clients for the agency such as Haagen-Dazs, LOVEFiLM, Casio and Jack Daniel‟s on home turf, as well as brands such as Symantec and ING for globe-spanning projects across multiple markets worldwide. Iain is regularly invited to speak on the topic of brand engagement and lead workshops and brainstorming sessions for agencies, brands and educational institutions. Iain Swan E. SENIOR MANAGEMENT TEAM
Client Services Director, and Partner An experienced, experiential marketing industry senior marketer, Dave is process driven, a strong communicator and leader of diverse teams with demonstrable track record of successful campaign development and account growth. Dave rose to Client Services Director and partner position at Electrify after driving successful and quantifiable growth across a wide range of Blue Chip brands brands including LOVEFiLM, Jack Daniels, Haagen-Dazs, Casio, Nationwide and Symantec. David Williams E. SENIOR MANAGEMENT TEAM
F. EXIT ANALYSIS
Exit is likely to happen around 2017 after 3 full operating years, to a major group such as Havas, Omnicom, WPP, Aegis, Chime etc A strategic sale is likely. As marketing spend is shifting, there is a prediction of an increased focus on creating engaging social media content, long term „branded experience platforms‟, driven by authentic „real world‟ experiences. There is a growing appetite from C-Suite at bluechip brands to work with strategically focused experiential marketing agencies on „brand activation‟ planning, especially those with an ethos that fuses mobile, social and experiential. As an agency we specialise in effectively designing strategies that combine live brand experiences with social media, and providing insight driven, structured planning methodologies for integrated experiential marketing services. The following research from the recent 2013 Market survey, demonstrates „multiple‟ predictions in these areas. F. EXIT ANALYSIS 7. Exit Analysis
F. EXIT ANALYSIS 6% 9% 20% 24% 16% 26% 9x or Greater 8x 7x 6x 5x Less than 5x FIG. 33 – Multiple of EBITDA Reasonable In Valuing Firms in EXPERIENTIAL MARKETING
F. EXIT ANALYSIS FIG. 38 – Multiple of EBITDA Reasonable In Valuing Firms in SHOPPER MARKETING 1% 7% 20% 27% 17% 27% 9x or Greater 8x 7x 6x 5x Less than 5x
F. EXIT ANALYSIS FIG. 28 – Multiple of EBITDA Reasonable In Valuing Firms in SOCIAL MARKETING 15% 18% 20% 20% 11% 15% 9x or Greater 8x 7x 6x 5x Less than 5x
10% 12% 17% 14% 24% 24% 9x or Greater 8x 7x 6x 5x Less than 5x F. EXIT ANALYSIS FIG. 40 – Multiple of EBITDA Reasonable In Valuing Firms in USER GENERATED CONTENT
F. EXIT ANALYSIS FIG. 42 – Multiple of EBITDA Reasonable In Valuing Firms in VIDEO 12% 7% 20% 24% 12% 15% 9x or Greater 8x 7x 6x 5x less than 5x
G. LOCATION
G. LOCATION Our offices are located on Rivington Street in the thick of Shoreditch, right next to Cargo and the Iniva Gallery, in an art deco building, originally built in the 1930‟s. The offices boast professional meeting rooms and a roof terrace, perfect for client meetings and industry networking.
APPENDIX
APPENDIX Medium Adspend (£ million) % change on 2011 Internet 5,416 13.2 Internet – pure-play digital only 4,793 12.9 TV & video on demand 4,480 0.4 National news brands 1,535 -6.0 Magazine brands 1,101 -9.4 Out-of-home 970 9.5 Radio 553 3.8 Cinema 213 25.6 Total UKadspend 17,172 2.3 UK Adspend 2012 Source: Advertising Association/Warc
The 2012 experiential league tables for companies ranked by their 2011 turnover from experiential activities is as follows. (Numbers in brackets shows last years position in the league tables, 2011 turnover from experiential marketing activities and % growth since 2012). 1. Jack Morton Worldwide (-, £42.1m, n/a) 2. TRO (1, £28.2m, +15.6%) 3. RPM (2, £24.0m, +50.9%) 4. iD Experiential (11, £12.7m, +101.6%) 5. Iris Experience (3, £11.8m, +3.5%) 6. Ignite (6, £11.3m, +36.1%) 7. Closer (5, £10.6m, +1.0%) 8. Exposure Promotions (7, £8.6m, +3.6%) 9. Blackjack Promotions (9, £7.9m, +16.1%) 10.Carbon Marketing (4, £7.8m, - 29.1%) 11.Innovision (-, £7.5m, +10.3%) 12.N2O (16, £7.2m, +53.2%) 13.Fizz Experience (8, £6.9m, -4.2%) 14.Sledge (17, £6.9m, +50.0%) 15.Event Marketing Solutions (15, £6.4m, +28.0%) 16.Sense Marketing Services (13, £6.1m, +7.0%) 17.Merchandising Sales Force (19, £3.0m, +8.3%) 18.Initials Marketing (-, £2.9m, +45.0%) 19.Haygarth (18, £2.4m, -47.8%) 20.Ear to the Ground (-, £2.3m, +4.5%) 21.The Field (-, £2.3m, +27.8%) 22.The Lounge Group (21, £2.0m, +17.6%) 23.Disrupt (-, £1.9m, -) 24.Link Communication (22, £1.3m, +16.7%) APPENDIX
APPENDIX22% 27% 32% 32% 32% 40% 42% 47% 49% 51% 59% 64% 66% 67% 33% 31% 37% 50% 41% 45% 49% 65% 70% 80% 74% 75% Shopper Marketing Corporate Communications Experiential Marketing Search Marketing Market Research Integrated Ad Agencies CRM/Database Marketing Marketing Technology Marketing/Strategic Consulting User Experiences/Design Interactive Agencies/Web Development Social Marketing Analytics Mobile Marketing 2012 2013 Q. For services firms, is your company considering expanding or acquiring any of the following services businesses? Fig. 5 – 2013 vs.2012 Areas of Expansion Interest - Services • The top three areas of interest for expansion or acquisition remained consistent with last year: mobile (67%), analytics (66%) and social (64%) • Overall, the percentage of respondents interested in the various sectors has declined since last year. • The sectors with the largest declines in interest declines in interest were search marketing (by 18 percentage points), social marketing and marketing /strategic consulting (both by 16 percentage points).
APPENDIX Areas of Expansion Interest - Content Q. For content firms, is your company considering expanding or acquiring any of the following content businesses? • The highest levels of interest for expansion or acquisition were digital media (69%), custom content (60%), app development (56%) and user-generated content (56%) • As with services sectors, overall interest in these various content sectors has declined since last year. • Through big data received a great deal of media coverage in 2012, only 21% of respondents are considering expanding or acquiring in that sector. 2% 20% 21% 24% 36% 40% 49% 49% 56% 56% 60% 69% 39% 66% 59% 79% 79% 90% 79% 79% Place-Based Media Ad networks Big Data Traditional Media Information/Database Publishing Lead Generation Marketing Services Online Video User-Generated Content App Development Custom Content Digital Media 2012 2013
This document is distributed by Electrify Worldwide Ltd (“Electrify”). This document is not intended to be a formal offering document. All information contained herein is strictly Private and Confidential. Interested parties should form their own independent views. No responsibility or liability is, or will be accepted, by Electrify, in relation to the accuracy or completeness of this document and any such liability is expressly disclaimed. This document is intended for distribution inside the UK. Recipients of this document in jurisdictions outside of the UK should observe applicable legal requirements and take the appropriate advice. Electrify is registered in England with company no. 8496601 at 81 Rivington Street, London EC2A 3AY.

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Electrify investment memorandum v3m

  • 2.
    Electrify Worldwide Ltd InvestmentMemorandum 4th June 2013
  • 3.
  • 4.
    A. INTRO/EXECUTIVE SUMMARY 1.Business Summary Electrify is a brand engagement agency, for the new era of „experience brands‟. For brands that know that how they behave, is even more important than what they say. By leveraging offline 'live brand experiences' and events online, through social media content and engagement - we generate real world „social currency‟, personal recommendations, and maximum reach. We are accountability and ROI driven, always measuring the tangible business impact of what we do.
  • 5.
    A. INTRO/EXECUTIVE SUMMARY 2.Proposed Financing • £200k total investment required
  • 6.
    • Reputable, highlycompetent and widely recognised senior management team. • CEO, ShazSmilansky is a world renowned author of book „Experiential Marketing a practical guide to interactive brand experiences‟, who also co-developed a Master‟s degree at London Metropolitan University: Digital Meets Experiential. • Agency has proprietary IP processes (BETTER brainstorm, and SETMESSAGE planning systems amongst others) relating to creative idea generation, strategic planning, campaign execution and evaluation. These remove emphasis on talent (and therefore keeps operation low risk and highly scalable), as clients „buy into‟ agency methodologies - rather than just individuals within client service team. Thus negating key common downsides to a „people business‟. • Branded engagement, experiences and content are incredibly high-growth and topical focuses for brands within their marketing mix, and play increasingly key roles in the success of brands‟ social media and mobile programs. • The agency pitch team regularly win business against rival „experiential agencies‟ who have billings in excess of £10m p/a. • Blue-chip client roster already exists, opportunities to grow those accounts substantially, is enormous. • Agency has implemented systems and processes, as well as agency wide compliance of a A. INTRO/EXECUTIVE SUMMARY 3. Pros of the Investment/Reasons to Invest
  • 7.
    A. INTRO/EXECUTIVE SUMMARY •Long sales cycles required to sell to senior decision makers in blue-chip brands, often sales cycles can span 2-6 months, impacting cashflow. • Clients often leaving their roles (moving to other brands); heightens need to network broadly within the company‟s marketing department. 4. Cons/Key Risks
  • 8.
    A. INTRO/EXECUTIVE SUMMARY Salesand net profit forecasts for May till December 2013 (8months) are below: 4. Deal Goals – Use of Proceeds Revenue 8 Months Net Margin Conservativ e £1,294,1 48 15% Reasonable £1,493,6 48 18% Positive £1,929,6 47 23% Sales and net profit forecasts for January till December 2014 (12 months) are below: Revenue 12 Months Net Margin Conservativ e £1,729,0 00 15% Reasonable £2,128,0 00 20% Positive £3,000,0 00 28% To provide a budget for business development focused marketing, and working capital to allow for the „longer sales cycles‟.
  • 9.
  • 10.
    B. MARKET OPPORTUNITY Themarketing and advertising industry is growing in the UK and globally - despite recession reports. „Engagement‟ continues to be considered highest on priority lists for brands and „content‟ is the biggest buzz word of the moment, and its popularity is going nowhere - with it being pinned at the most topical area for future growth in coming years. Live brand experiences and events are well known to be prime sources for both consumer engagement and digital content. Logical, bearing in mind a real life experience is clearly more engaging and authentic than a pre-engineered traditional advertisement. Results International have 21 years of experience and over 200 deals completed, they are the market leader in providing corporate finance and consulting advice to Marketing Communications companies. According to Results International: “Experiential has found its way to the heart of the marketing mix. The agencies that will succeed in this arena are those that can match their experiential expertise with digital technology and social media creating brand engagement. Social media-ready brand experiences that transcend live and digital domains are the future.” 1A. The Market
  • 11.
    The Advertising Associationand Warc's quarterly Expenditure Report (UK) forecasts growth of 2.7 per cent this year and 5 per cent in 2014, and sites that Adspend grew 2.3 per cent year on year to reach £17.2 billion in 2012. Global ad spending grew by 3.2% last year, but some sectors fared better than others, details Nielsen. Econsultancy's first Content Marketing Survey Report, sponsored by Outbrain, is based on a survey of more than 1,300 marketers working for brands, agencies, and publishers. It shows: Increased engagement is the most commonly cited objective for content marketers, with 52% of in-house marketers and 58% of agency marketers listing this as one of their top three business objectives. Over 90% of respondents believe that content marketing will become more important over the next 12 months. In the 2013 Market survey report, Ad Media Partners asked senior executives in leading content and marketing services companies “For services firms, is your company considering expanding or acquiring any of the following services businesses?” „Experiential Marketing was selected 32% of the time, Social Marketing was selected 64% of the time, and Mobile Marketing was selected 67% of the time‟. 1B. Key Stats Below: B. MARKET OPPORTUNITY
  • 12.
    The landscape for„experiential marketing agencies‟ is comprised of a variety of agencies who offer a varying scope of services, ranging from tactical promotional staffing agencies, to event agencies and more content and engagement driven agencies such as Electrify. However, there are few who focus on and harness a strategic proposition or effectively offer auxiliary services which strengthen and leverage the power of an event or live experience as branded content. Agencies vary from independents to those owned by groups, though true global players with a proposition aimed at C-Suite brand executives are limited. Future competition is likely to come from strengthened offerings provided by larger agencies buying smaller ones. 2. Competition: B. MARKET OPPORTUNITY
  • 13.
  • 14.
    C. SERVICES We designintegrated marketing communications that are content driven, and built around live brand experiences. We offer brand strategy, creative thinking, and create long-term brand platforms that drive brand advocacy and ultimately evangelism. Prospects and clients are Marketing Directors, CMO‟s, VP‟s of Marketing, Brand Managers, Marketing Managers, Heads of Brand Engagement, Heads of Social Media
  • 15.
  • 16.
  • 17.
    SOCIAL MEDIA &APPS C. SERVICES
  • 18.
  • 19.
  • 20.
  • 21.
    POP UP SHOPS& EVENTS C. SERVICES
  • 22.
  • 23.
  • 24.
  • 25.
  • 26.
  • 27.
    Current Clients Include: D.SALES/MARKETING STRATEGY
  • 28.
    D. SALES/MARKETING STRATEGY 1.Our ideal customers which we are targeting with our business development and marketing initiatives, are as previously mentioned; CMO‟s, Marketing Directors, Senior Brand Managers, Brand Managers, Marketing Managers, Heads of Marketing, Heads of Social Media at major blue-chip brands. We have a primary focus on the following sectors: Electronics, FMCG, Alcohol, Finance, and Online brands. We can reach our audience via a number of channels such as creating thought leadership and social events, and meeting them at networking events and speaking opportunities. We also have a secondary strategy to gain introductions (not white-label) which is to complete projects through media, digital and creative agencies. 1. The cost to acquire a client varies greatly depending on a number of factors, we have designed a diagram demonstrating an overview to our sales and marketing strategy below.
  • 29.
  • 30.
    The sales processtends to take around 3 months on average, to take a prospect through the pipeline, though the range is broad; varying between 1 month and 1 year. It then takes an average of 6 weeks to implement a project following its sign off, and around 4 weeks following on from project completion in order to extract another brief from the client. 3B.
  • 31.
    D. SALES/MARKETING STRATEGY 4.Major customers are aforementioned, with the addition of some other media agency partners. Case studies of past projects can be found as an appendix. Historic spend and forecasted spend (aligned with „Reasonable‟ middle tier forecasts) are broken down in the following table.
  • 32.
    D. SALES/MARKETING STRATEGY ClientBS 2011 BS 2012 BS 2013 Electrify 2013 Electrify 2014 Spend Spend Spend Spend Forecast* Forecast** LOVEFiLM £50,000.00 £429,000.00£50,000.00 £0.00 £60,000.00 £100,000.00 Amazon £0.00 £0.00 £0.00 £0.00 £120,000.00 £350,000.00 General Mills £150,000.0 0 £0.00 £10,000.00£266,859.0 0 £332,000.00 £350,000.00 Casio £0.00 £83,000.00 £58,000.00 £0.00 £110,000.00 £110,000.00 Symantec £0.00 £60,000.00 £104,000.0 0 £0.00 £0.00 £125,000.00 Nationwide £0.00 £0.00 £27,000.00£24,274.00£200,000.00 £250,000.00 Zurich £0.00 £0.00 £49,000.00 £0.00 £75,000.00 £250,000.00 BrownForman*** £0.00 £250,000.00 £0.00 £0.00 £100,000.00 £300,000.00 L’Oreal £0.00 £30,000.00 £0.00 £0.00 £85,000.00 £250,000.00 MSM £0.00 £0.00 £25,000.00 £0.00 £75,000.00 £200,000.00 Fitness First £0.00 £0.00 £70,000.00 £0.00 £15,000.00 £70,000.00 Paddy Power £0.00 £0.00 £5,000.00 £0.00 £20,000.00 £75,000.00 Total £200,000.00 £852,000.00 £398,000.00 £291,133.00 £1,192,000.00 £2,430,000.00 Media Agency Spend Spend Spend Spend Forecast* Forecast Rapport (Yoplait+) £0.00 £0.00 £123,000.0 0 £210,207.0 0 £229,000.00 £370,000.00 Talon £0.00 £0.00 £0.00 £0.00 £50,000.00 £100,000.00 Kinetic £657,396.0 0 £344,449.00£11,200.00£48,307.00£109,000.00 £100,000.00 Total £0.00 £344,449.00 £134,200.00 £258,514.00 £388,000.00 £570,000.00 Combined Total £857,396.00 £1,196,449.00 £532,200.00 £549,647.00 £1,580,000.00 £3,000,000.00 Reasonable Target n/a n/a n/a £1,929,647. 00 % of Target Existing Client Target n/a n/a n/a £1,580,000. 00 82 New Biz n/a n/a n/a £349,647.00 18 Historically, LOVEFiLM have been able to determine their own marketing spend and behaviour, however, now that Amazon have started to play a much more assertive role in the business, marketing spends are subject to another level of sign off. Amazon are very traditional in their way of thinking, as such spend with LOVEFiLM is subject to a decrease from last year. We are aiming to infiltrate and prove that our channel can produce quantifiable results for Amazon, with the aim of building a strong long term relationship. Brown Forman: in 2012 we were tasked with creating and project managing the renowned JD Barrel Tree, this represented a high spend through our channel. The decision was taken this year was to not repeat this activity, however there are indications that it may reappear in 2014. The aim is to infiltrate via our know contacts and generate new opps and briefs aside from the Barrel Tree. *This is the combined total of current spend and forecasted spend for 2013 **Please note that all 2014 forecasts are just that *** We are classing BF as a direct client, as this is now the case
  • 33.
    D. SALES/MARKETING STRATEGY 5.High Level P&L Under Different Scenarios for 2013 (8 months) and 2014 OVERHEADS (not inc. direct) Category 8 Months Personell £341,003 Marketing £30,660 Admin £31,383 Office Facilities (inc rates) £55,890 Finance £23,336 £482,272 2013 (MAY-DEC 8months) Revenue 8 Months Direct Costs Overheads (inc. direct) Net Profit Conservative £1,294,148 £592,913 £1,075,185 £218,963 Reasonable £1,493,648 £672,713 £1,154,985 £338,663 Positive £1,929,647 £847,112 £1,329,384 £600,263 BONUS SCHEME Revenue 8 Months % of Salaries Profit Bonus Pool Net Profit After Bonus Net Margin Conservative £1,294,148 10% £218,963.00 £29,982.00 £188,981.00 15% Reasonable £1,493,648 25% £338,663.00 £74,956.00 £263,707.00 18% Positive £1,929,647 50% £600,263.00 £149,912.00 £450,351.00 23%
  • 34.
    D. SALES/MARKETING STRATEGY 2014Annual 12 Months OVERHEADS (not inc. direct) Category Annual Personell £512,047 Marketing £48,000 Admin £46,560 Office Facilities (inc rates) £96,020 Finance £35,000 £737,627 Revenue Annual Direct Costs (40%) Overheads (inc. direct) Net Profit Conservative £1,729,000 £691,600 £1,429,227 £299,773 Reasonable £2,128,000 £851,200 £1,588,827 £539,173 Positive £3,000,000 £1,200,000 £1,937,627 £1,062,373 BONUS SCHEME Revenue % of Salaries Profit Bonus Pool Net Profit After Bonus Net Margin Conservative £1,729,000 10% £299,773.00 £45,044.00 £254,729 15% Reasonable £2,128,000 25% £539,173.00 £112,609.00 £426,564 20% Positive £3,000,000 50% £1,062,373.00 £225,218.00 £837,155 28%
  • 35.
    D. SALES/MARKETING STRATEGY 6.A breakdown of spend associated with our proposed business development / marketing tactics is below. These activities have been tried and tested as effective in the past and will be important in Electrify‟s customer acquisition plans CHANNEL ACTIVITIES Q2 Q3 Q4 MAY JUNE JULY AUGUST SEPT OCT NOV DEC OPPORTUNITY SOURCING Individual, tailored emails (insight driven) Telemarketing follow up calls (after emails) £1,000.00 £1,000.00 £1,000.00 £1,000.00 £1,000.00 £1,000.00 Intermediaries (AAR etc) Partnerships / JV's (Agency relationships) WEB /BRAND PRESENCE SEO £150.00 £150.00 £150.00 £150.00 £150.00 £150.00 £150.00 £150.00 Website (Programming updates) £200.00 £25.00 £25.00 £25.00 Website & Branding (Design / branding) £1,250.00 Tumblr Blog Twitter Linked In Group Instagram Other Social Media Office Signage £750.00 SCHMOOZING CRM LIST Drinks events - inviting prospects and dormant clients £500.00 £1,250.00 Lunches - inviting prospects and dormant clients £550.00 £550.00 £550.00 £550.00 £550.00 £550.00 £350.00 £500.00 Gifts - birthdays, new jobs, xmas, other holidays £100.00 £100.00 £100.00 £100.00 £100.00 £250.00 Launch party £500.00 EXPERT EVENTS Speaking opportunities - contacting all event organisers Seminars - hosting them £1,000.00 £1,000.00 Roundtable dinners - hosting them £800.00 £800.00
  • 36.
    D. SALES/MARKETING STRATEGY ChannelActivities MAY JUNE JULY AUG SEPT OCT NOV DEC CONTENT PARTNERSHIPS Research Whitepaper Slideshare Infographics Videos £100.00 Articles Research Launch Event £875.00 Capture page £50.00 CREDIBILITY Awards - entering PR (online + offline) £525.00 £525.00 £525.00 £525.00 £525.00 £525.00 £525.00 £525.00 League tables NETWORKING Networking Events Marketing Society £430.00 £100.00 £100.00 £380.00 £200.00 £200.00 £200.00 Industry Launches SEGMENTED E-SHOTS Newsletter (HTML) £70.00 £70.00 £70.00 £70.00 £70.00 £70.00 £70.00 £70.00 Personal emails (text) Data £500.00 £500.00 £500.00 DM Post items (showreel, books +) Direct response postal letters £340.00 £600.00 £600.00 £4,420.00 £4,965.00 £4,195.00 £2,520.00 £5,175.00 £3,620.00 £2,295.00 £3,470.00 6. Continued Q2 Q3 Q4
  • 37.
  • 38.
    CEO & Exec.Creative Director, and Partner A marketer, writer, strategist, creative, visiting professor and entrepreneur – Smilansky is a recognised star in the marketing field. Shaz is Visiting Professor at the London Metropolitan University, has co-develop the first Masters degree on Experiential Marketing in the UK „Digital Meets Experiential‟. She sits on the board of the World Brand Congress 2013, has been a regular guest speaker on BBC radio (Wake up to Money, and BBC Radio 5 Live). Shaz is also the only UK author to have released a book on Experiential Marketing, her book titled „Experiential Marketing, a practical guide to interactive brand experiences‟ is sold in international markets. The book is published by Kogan Page, Europe‟s leading independent business publisher. Shaz regularly flies around the globe to speak at industry events, and teach reputable agencies and high profile brands the Experiential Marketing methodology that she speaks about in her book. Shaz often hosts workshops which focus on the relationship between live brand experiences and social media, as well as how ShazSmilansky E. SENIOR MANAGEMENT TEAM
  • 39.
    Financial & CommercialDirector, and Partner David is a multi-discipline Financial Accountant with over ten years‟ experience within the within the marketing and PR industry; a dedicated and enthusiastic professional with extensive financial and general business management experience. David develops and implements the production of financial and management information, leads on creating a culture of commercial awareness within the agency, and oversees negotiations and volume deal arrangements to achieve cost efficiencies with suppliers. Prior to joining the team, David was at Hills Balfour Ltd – The UK‟s leading Marketing and PR company in the travel & tourism industry, there he was responsible for the Finance, IT, HR and Office management departments, and grew the company turnover to over £5m and over 50 staff with 3 subsidiary companies. David Shobanjo E. SENIOR MANAGEMENT TEAM
  • 40.
    Strategy & BusinessDevelopment Director, and Partner After graduating with a Master‟s degree with Merit in Events Marketing and Management, Iain has risen within the world of Marketing at an accelerated pace as Strategy & Business Development Director, and partner to lead Electrify‟s new business and marketing machine whilst maintaining overall responsibility for the agency‟s strategic output. By leading on outstanding sales processes, pitches and proposals Iain has successfully acquired clients for the agency such as Haagen-Dazs, LOVEFiLM, Casio and Jack Daniel‟s on home turf, as well as brands such as Symantec and ING for globe-spanning projects across multiple markets worldwide. Iain is regularly invited to speak on the topic of brand engagement and lead workshops and brainstorming sessions for agencies, brands and educational institutions. Iain Swan E. SENIOR MANAGEMENT TEAM
  • 41.
    Client Services Director,and Partner An experienced, experiential marketing industry senior marketer, Dave is process driven, a strong communicator and leader of diverse teams with demonstrable track record of successful campaign development and account growth. Dave rose to Client Services Director and partner position at Electrify after driving successful and quantifiable growth across a wide range of Blue Chip brands brands including LOVEFiLM, Jack Daniels, Haagen-Dazs, Casio, Nationwide and Symantec. David Williams E. SENIOR MANAGEMENT TEAM
  • 42.
  • 43.
    Exit is likelyto happen around 2017 after 3 full operating years, to a major group such as Havas, Omnicom, WPP, Aegis, Chime etc A strategic sale is likely. As marketing spend is shifting, there is a prediction of an increased focus on creating engaging social media content, long term „branded experience platforms‟, driven by authentic „real world‟ experiences. There is a growing appetite from C-Suite at bluechip brands to work with strategically focused experiential marketing agencies on „brand activation‟ planning, especially those with an ethos that fuses mobile, social and experiential. As an agency we specialise in effectively designing strategies that combine live brand experiences with social media, and providing insight driven, structured planning methodologies for integrated experiential marketing services. The following research from the recent 2013 Market survey, demonstrates „multiple‟ predictions in these areas. F. EXIT ANALYSIS 7. Exit Analysis
  • 44.
    F. EXIT ANALYSIS 6% 9% 20% 24% 16% 26% 9xor Greater 8x 7x 6x 5x Less than 5x FIG. 33 – Multiple of EBITDA Reasonable In Valuing Firms in EXPERIENTIAL MARKETING
  • 45.
    F. EXIT ANALYSIS FIG.38 – Multiple of EBITDA Reasonable In Valuing Firms in SHOPPER MARKETING 1% 7% 20% 27% 17% 27% 9x or Greater 8x 7x 6x 5x Less than 5x
  • 46.
    F. EXIT ANALYSIS FIG.28 – Multiple of EBITDA Reasonable In Valuing Firms in SOCIAL MARKETING 15% 18% 20% 20% 11% 15% 9x or Greater 8x 7x 6x 5x Less than 5x
  • 47.
    10% 12% 17% 14% 24% 24% 9x or Greater 8x 7x 6x 5x Lessthan 5x F. EXIT ANALYSIS FIG. 40 – Multiple of EBITDA Reasonable In Valuing Firms in USER GENERATED CONTENT
  • 48.
    F. EXIT ANALYSIS FIG.42 – Multiple of EBITDA Reasonable In Valuing Firms in VIDEO 12% 7% 20% 24% 12% 15% 9x or Greater 8x 7x 6x 5x less than 5x
  • 49.
  • 50.
    G. LOCATION Our officesare located on Rivington Street in the thick of Shoreditch, right next to Cargo and the Iniva Gallery, in an art deco building, originally built in the 1930‟s. The offices boast professional meeting rooms and a roof terrace, perfect for client meetings and industry networking.
  • 51.
  • 52.
    APPENDIX Medium Adspend (£ million) %change on 2011 Internet 5,416 13.2 Internet – pure-play digital only 4,793 12.9 TV & video on demand 4,480 0.4 National news brands 1,535 -6.0 Magazine brands 1,101 -9.4 Out-of-home 970 9.5 Radio 553 3.8 Cinema 213 25.6 Total UKadspend 17,172 2.3 UK Adspend 2012 Source: Advertising Association/Warc
  • 53.
    The 2012 experientialleague tables for companies ranked by their 2011 turnover from experiential activities is as follows. (Numbers in brackets shows last years position in the league tables, 2011 turnover from experiential marketing activities and % growth since 2012). 1. Jack Morton Worldwide (-, £42.1m, n/a) 2. TRO (1, £28.2m, +15.6%) 3. RPM (2, £24.0m, +50.9%) 4. iD Experiential (11, £12.7m, +101.6%) 5. Iris Experience (3, £11.8m, +3.5%) 6. Ignite (6, £11.3m, +36.1%) 7. Closer (5, £10.6m, +1.0%) 8. Exposure Promotions (7, £8.6m, +3.6%) 9. Blackjack Promotions (9, £7.9m, +16.1%) 10.Carbon Marketing (4, £7.8m, - 29.1%) 11.Innovision (-, £7.5m, +10.3%) 12.N2O (16, £7.2m, +53.2%) 13.Fizz Experience (8, £6.9m, -4.2%) 14.Sledge (17, £6.9m, +50.0%) 15.Event Marketing Solutions (15, £6.4m, +28.0%) 16.Sense Marketing Services (13, £6.1m, +7.0%) 17.Merchandising Sales Force (19, £3.0m, +8.3%) 18.Initials Marketing (-, £2.9m, +45.0%) 19.Haygarth (18, £2.4m, -47.8%) 20.Ear to the Ground (-, £2.3m, +4.5%) 21.The Field (-, £2.3m, +27.8%) 22.The Lounge Group (21, £2.0m, +17.6%) 23.Disrupt (-, £1.9m, -) 24.Link Communication (22, £1.3m, +16.7%) APPENDIX
  • 54.
    APPENDIX22% 27% 32% 32% 32% 40% 42% 47% 49% 51% 59% 64% 66% 67% 33% 31% 37% 50% 41% 45% 49% 65% 70% 80% 74% 75% Shopper Marketing Corporate Communications ExperientialMarketing Search Marketing Market Research Integrated Ad Agencies CRM/Database Marketing Marketing Technology Marketing/Strategic Consulting User Experiences/Design Interactive Agencies/Web Development Social Marketing Analytics Mobile Marketing 2012 2013 Q. For services firms, is your company considering expanding or acquiring any of the following services businesses? Fig. 5 – 2013 vs.2012 Areas of Expansion Interest - Services • The top three areas of interest for expansion or acquisition remained consistent with last year: mobile (67%), analytics (66%) and social (64%) • Overall, the percentage of respondents interested in the various sectors has declined since last year. • The sectors with the largest declines in interest declines in interest were search marketing (by 18 percentage points), social marketing and marketing /strategic consulting (both by 16 percentage points).
  • 55.
    APPENDIX Areas of ExpansionInterest - Content Q. For content firms, is your company considering expanding or acquiring any of the following content businesses? • The highest levels of interest for expansion or acquisition were digital media (69%), custom content (60%), app development (56%) and user-generated content (56%) • As with services sectors, overall interest in these various content sectors has declined since last year. • Through big data received a great deal of media coverage in 2012, only 21% of respondents are considering expanding or acquiring in that sector. 2% 20% 21% 24% 36% 40% 49% 49% 56% 56% 60% 69% 39% 66% 59% 79% 79% 90% 79% 79% Place-Based Media Ad networks Big Data Traditional Media Information/Database Publishing Lead Generation Marketing Services Online Video User-Generated Content App Development Custom Content Digital Media 2012 2013
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