Publicis Groupe is back on track with its digital acquisitions only months after its failed merger with rival Omnicom, and it’s going big.
The French holding company said Monday morning that it has inked a deal to acquire Boston-based digital network Sapient Corp for $3.7 billion in an all-cash transaction at $25 per share. The deal creates a new “digital platform” called Publicis.Sapient. Sapient CEO Alan Herrick will lead the group and join Publicis Groupe’s Directoire. Jerry A. Greenberg, founder and board co-chairman of Sapient, will join Publicis Groupe’s Supervisory Board as an independent member.
The companies expect the deal to close in the first quarter of 2015 pending regulatory or antitrust clearance in the US and Germany. Citi is advising Publicis.
“Sapient is a ‘crown jewel,’ a one-of-a-kind company born in the technology space with strengths in marketing, communications, consulting and omni-channel commerce, all of which are equally important to best help clients achieve their digital transformation,” says Publicis CEO Maurice Levy. “It will also give Publicis Groupe access to new markets and creating new revenue streams.”
The company said the deal is “expected to drive cost savings through the integration of digital production, leveraging Sapient’s substantial production infrastructure in India.” Cost savings could amount to over $60 million annually, it said.
Sapient Corp, which is broken into three groups – marketing services firm SapientNitro, Sapient Global Markets and Sapient Government Services – reported worldwide service revenue of $1.26 billion in 2013. SapientNitro has more than doubled its revenue in five years to $851 million in 2013, making it a close second to digital agency network DigitasLBi within the $9.2 billion French holding company. DigitasLBi in 2013 raked in $909 million in revenue, according to the Ad Age DataCenter.
While Publicis’ digital scale is evident, the failed mega merger with Omnicom highlighted the shortcomings of the advertising holding companies on their own. The industry consensus was that Publicis was stronger on the digital front but Omnicom had better creative resources, unearthing speculation that the shortcomings would come to define the kinds of deals the companies would look at next.
But rather than go the creative route, Publicis seems to have rediscovered its original appetite for major tech-heavy digital acquisitions. Last April – prior to the announcement of the planned merger with Omnicom – CEO Maurice Levy announced that the French advertising group was planning to spend almost $4 billion in acquisitions over the next five years. The announcement had come after a long string in similar mega deals, including LBi ($450 million) and Rokkan ($575 million) in 2012, Rosetta ($575 million) in 2011, Razorfish ($530 million) in 2009 and Digitas ($1.3 billion) in 2007.
Sapient’s multi-shop makeup is also consistent with Publicis’ affinity for large digital agency networks consisting of multiple agencies. Typically, the group has built them by combining new and existing shops. Publicis formed the DigitasLBi network in February 2013 by merging Digitas and Amsterdam-based digital network LBi a month after the company acquired LBi for $591 million, for example. More recently, the company said it would bring Razorfish and Rosetta under one larger group called Razorfish Global. The company also recently moved social group MRY into the Starcom MediaVest Group media agency network.
For Sapient, which is among the largest remaining independent agency groups, the deal cements a long term goal of looking more like a marketing services group than a technology company.
Sapient Corp, which opened its doors in 1990, had been known as a technology company until it bought Nitro Group, a global ad agency network operating in North America, Europe, Australia and Asia. In the 10-K, Sapient said: “We acquired Nitro to leverage its traditional advertising services with our digital commerce and marketing technology services.” Nitro Group was founded in 2001 in China. Sapient Corp. in February 2010 combined its Sapient Interactive and SapientNitro divisions as a single brand.
The combined entity has since completed a number of acquisitions strengthening its capabilities on the data and marketing services fronts.
Sapient Corp acquired Iota Partners, Second Story and mphasize, over the past 18 months in an effort to better support marketing mix modeling and ultimately broad strategy for clients, the company’s CMO Bill Kanarick told Ad Age earlier this year. To boost its creative cred, the firm, mostly known for its technology capabilities, also bought marketing services shops like La Communidad and Campfire early this year.