Have aggregators had their day?
A few years ago it was fashionable for entrepreneurs in the marketing services industry to search out a company – probably already listed on the stock exchange – and transform it into a mini WPP Group by acquiring as many businesses as possible involved in supplying marketing services of one sort or another.
Creston did it. Cello did it. Media Square did it. Cagney sort of did it. Mission under-did it. Incepta over-did it. But none of them have succeeded in the way that WPP succeeded, not least perhaps because WPP started by focussing on design consultancies and then took the first opportunity to leapfrog into a different league by acquiring an established global network in the shape of J Walter Thompson.
So what makes David Wright, Adam Reynolds and Paul Foulger think they can make a success of their newly acquired vehicle Porta Communications, announced last week? What lessons can they learn from the past?
Some of the more successful public companies in the sector have focussed primarily or initially on acquiring companies engaged in a single discipline – like public relations (Huntsworth, Chime and Next Fifteen) or media buying (Aegis Group). Before them, there were a fistful of companies that had their roots in advertising like Abbott Mead Vickers, Lowe Howard Spink and Boase Massimi Pollitt.
A single discipline does not guarantee success, but it possibly gives a clearer initial focus and enables investors to have a better idea of the business in which they have risked their money. It also gives the management a better chance of understanding what they are managing.
Additionally it’s probably important to build scale as soon as practicable because the stock market has little time for minnows. And minnows can’t afford to acquire much else.
Porta will make a very interesting test case of whether the days of marketing company aggregators have past.
Bob Willott is editor of “Marketing Services Financial Intelligence” at www.fintellect.com.