M&A Activity Slows for Advertising and Marketing

Merger and acquisition declined sharply in the fourth quarter in the advertising, marketing and digital media sectors, according to a report released by the investment banking firm Petsky Prunier.

The 140 transactions it tracked from the fourth quarter totaled $4.7 billion, reflecting a 42% decline in deal volume compared to the fourth quarter of 2007, and a 27% decline from the third quarter of 2008.

Two advertising and marketing agency services holding companies, WPP Group and Aegis Group accounted for the largest number of transactions, with 11 and 10 deals respectively.

One of WPP’s notable fourth quarter acquisitions was Standard Rate and Data Services, which involved a swap of assets between WPP and Nielsen Co.

Most transactions were in the digital media sector, especially in the social media category. Petsky Prunier tracked 50 transactions in the fourth quarter. It nevertheless reflected a 7% decline compared to the fourth quarter of 2007 and down 35% from the third quarter of 2008.

The interactive advertising sector saw a sharp decline in transactions throughout 2008. Petsky Prunier tracked 167 interactive advertising-related deals with an estimated $3.2 billion value in 2008, but number of transactions was down 29% and estimated dollar value was five times lower than 2007.

Most deals in the interactive advertising category involved agencies. Some of the more active categories were Internet advertising networks, digital video, mobile advertising, e-mail services, online lead generation and search engine marketing.

Many agency deals during the fourth quarter involved acquisitions outside of the U.S. Aegis Group acquired IF in Malaysia, Publicis Groupe acquired Tribal in Brazil and Microsoft’s subsidiary Razorfish purchased WYSIWYG, based in Spain.

Deals in the marketing research area primarily involved companies generating data online. The report noted that less and less survey data is being generated by direct mail, telephone or in-person.

For the fifth straight quarter, transactions in the production and mailing sector, including print, lettershop and fulfillment services led in transaction volume and value. Petksy Prunier tracked transactions with a $166 million estimated value in the fourth quarter, but this was lower compared to previous quarters, according to its report.

There were no major direct marketing agency deals in the fourth quarter, compared to three deals in the third quarter.