The digital land grab continued today when independent agency LBi was snapped up by network giant Publicis in a deal worth €416m. So has Publicis got itself a good deal?
The Drum asked Green Square partner Tony Walford, the man who first tipped LBi for acquisition back in June and an expert in providing financial advice to media companies, to run the rule over the numbers.
It was Walford who identified LBi as the next 'one to watch' in the digital industry following WPP's acquisiton of AKQA this summer.
Perhaps the only real surprise of today's announcement is that it was Publicis, and not Omnicom - which admitted it was in talks with LBi in June - that got the deal over the line.
Walford said: "Although Omnicom had been tipped, it was Publicis that swooped, notwithstanding their acquisition of US digital agency Rosetta for $575m last May. This clearly puts Publicis in a very strong position vis-a-vis digital scale.
"With revenues of €119.4m and adjusted EBITDA of €19.9m in the six months to 30 June 2012 the €416m ($540m) valuation seems high, but it shows an interesting parallel with the $540m paid by WPP for AKQA who had annual revenues of $230m."
These kind of price tags are evidence of the 'digital land grab' that has seen a number of independent agencies become takeover targets for the networks this summer, Walford said. "With few remaining independents of scale in this sector some level of premium in the price might be expected," he explained.
So what has Publicis got for its money and what does this deal mean for the industry? Back to Walford to crunch the numbers...
"The LBi story of recent years has been somewhat of a roller-coaster, with an operating loss of €63.1m in 2009 and around break-even in whether €416m sale to Publicis is a good deal 2010. So with healthy revenue growth in 2011 and 2012 and much improved profit margins this appears to point to an astute acquisition being made at a time that the target is very much on the upward swing.
"We can expect to see further consolidation over the next six months as the land grab continues..."