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 businessesas 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 lessonscan 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 disciplinedoes 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.

  • http://www.usabirdcontrol.com/ Teal Smith

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  • http://www.idcomms.com TOM DENFORD

    Who seriously thinks that’s a good investment? It will be very interesting to watch but you won’t find my money in there I’m afraid.
    To build the best, most competitive group offering, the group will need to acquire some of the best, most competitive smaller companies. Only snag is, these days the best ones won’t sell.
    Too many brilliant founders have had their fingers burned and ambitions extinguished in the last decade when selling to groups and we’ve all learned by proxy that selling to a group makes you neither particularly rich, nor famous (and certainly not very happy). Those that have completed their earn outs and set up something new vow never to sell again. We’re all much more determined to succeed without being bought out, by working together – that’s a far healthier business model.
    Not music to the city’s ears perhaps but this belief that only scale succeeds is going to have to be adjusted.