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Did Creative Counsel really land a plum deal with Publicis?

Believed to be worth around R1.5 billion – undoubtedly the largest in the local industry’s history.

This article was first published on Adlip here.

Earlier this month, The Creative Counsel, SA’s largest advertising and marketing agency, confirmed it had been acquired by French advertising group Publicis. Although neither party has revealed the value of the deal, it is believed to be worth around R1.5 billion – undoubtedly the largest in the local industry’s history. According to reports, The Creative Counsel currently employs more than 1 500 full-time staff and has annual turnovers exceeding R700 million. Andrew Bahlmann, Director of Xigo, a specialist merger and acquisition firm, explains that ultimately, ‘the value of any transaction is what’s going to be yielded or returned over the next couple of years.’

“Now, I haven’t seen the financials and I haven’t seen the deal sheet, but this could be a structured deal over say, five years,” says Bahlmann. “There’s speculation on the quantum between R1 billion or R2 billion… it seems like a really good deal. However (and we often structure deals like this), it depends on what the sellers want to do. If someone is coming in, and they really want to grow aggressively, they may say, ‘ok you’re turning over R750 million, we’re going to fund growth to R2 billion, if we hit those numbers, we’ll give you another R500 million’… so there are those triggers.”

He adds that seldom will ‘somebody come to the party and say, here’s your R1.5 billion, enjoy!’

“Typically, there are triggers… but there’s often synergy, and that’s where we [Xigo Acquisition specialists] – in our game – yield really good results,” he notes. “For example, if you have an agency and your client is a big blue chip company, ‘I’m coming in and I’ve tried for 10 years to get access to your clients. I’m going to pay a premium, because although you’re doing R1 million worth a month of business with that client, I can roll in R100 million a year… My R100 million has zero value without your business!’”

Bahlmann adds: “So I need to pay you for that luxury, or conduit, and often that’s how these things roll out. When juggernauts [like Publicis] come in, they come in at a very calculated level, and nobody overpays – they pay for value. And clearly they’ve seen a runway that is going to give them their returns…”


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