Social agencies ‘six months to sell’

Directors of social media agencies have just over six months to exploit the big marketing groups’ land grab in the sector before interest wanes and other agencies catch up with their specialist skills, according to one M&A expert.
Results International managing partner Keith Hunt issued this stark warning on the back of this week’s deal that has seen Publicis (pictured) acquire a majority stake in pure-play social media agency Big Fuel based in New York.
At the start of the year Results predicted a social media land grab and the last two weeks back up this prediction, with the Publicis deal following M&C Saatchi buying into Human Digital.
Hunt said: “It’s also further demonstration that the major networks have very significant funding to continue acquiring in the digital/social media space; this was reinforced by Maurice Levy announcing that the group’s M&A budget for 2011 had been ‘bumped up to nearly $1bn, from $700m’.
“Owner/managers of social media agencies looking to realise the value they have built in their businesses will increasingly have their eye on a sale. There are still only a few independent social media agencies of any significant size – perhaps a dozen at most in the UK – so rarity value is playing in their favour.”
But Hunt added: “The window of opportunity to sell is likely to be pretty brief – the ‘sizzle’ in the market will soon disappear, and now is the time to act. We are seeing social media agencies starting to lose pitches to non-specialist agencies. A range of warning signs leads us to believe that social media agencies have this year and possibly some of 2012 to make their move.
“In the short term we predict real competition to bag the most attractive names in social media and recent events confirm this. Many buyers are willing to take a punt on agencies with little or no track record; not quite the $20m paid by Yahoo! for 12-week-old company, IntoNow, but nonetheless higher than for conventional agencies.”

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