Dive Brief:

• The deal value of mergers and acquisitions (M&A) among advertising and marketing companies fell 15% to $27.7 billion last year amid a pullback in buyouts of ad-tech firms, according to a study by consulting firm R3 shared with Marketing Dive. Its research found that increasing a regional presence and broadening services were the key drivers of M&A activity in 2019.
• Major holding companies cut the number of M&A deals by more than half while the dollar value rose by 8% to $6.53 billion. Almost two-thirds of that amount consisted of Publicis Groupe's $4.16 billion takeover of data giant Epsilon, the biggest deal of the year. Dentsu had the highest deal volume with 12 transactions, including acquisitions of direct-to-consumer agency MuteSix and ad agency Chef in Colombia.
• Private equity firms boosted their M&A activity in marketing services by 44% to $6.6 billion as Bain Capital and Blackstone Group participated in two of the top five deals of 2019. Consulting firm Accenture also was among the top 10 buyers with $1.46 billion in deals last year, including buying the agency Droga5, per R3, which analyzed 489 transactions for its study.

Dive Insight:

Ad holding companies for years were the biggest drivers of M&A activity in the marketing services industry, but in 2019 set their sights on restructuring and integration of prior acquisitions in response to changing client demands. Those dual focuses emerge as the major agency players weather a tough market for growth amid spending cuts and continued in-housing of marketing services among brands.  

Interpublic, Omnicom and WPP were notably absent from R3's ranking of top 10 buyers last year, while Publicis participated in the biggest transaction with its takeover of Epsilon, which is now a key focus for integration with its other holdings. Publicis buying the data marketing firm faced some criticism from analysts given the company's struggles integrating prior purchases, like Sapient. Dentsu was also very active with its dealmaking in 2019, although the company tended to focus on smaller transactions before cutting its revenue forecast amid a global restructuring.

Ad-tech and martech companies saw a 24% drop to about $11 billion in deal value, but still made up the biggest category of acquisition targets last year, ahead of digital full-service agencies ($1.68 billion), creative full-service agencies ($1.67 billion) and digital design and production ($1.18 billion), among others, according to R3. Martech companies also cut their buying activity by 26% to $5.74 billion, putting them behind private equity firms ($6.6 billion) and agency holding groups ($6.5 billion).

"Though martech and adtech have driven M&A value, there has been more interest in acquisitions that will increase regional presence and serviceability," Greg Paull, principal at R3, said in a statement. "Buyers have been looking at investments that will strengthen their position in an uncertain geopolitical climate."

Geopolitical uncertainty, including trade tensions between the U.S. and China, led many North American companies to look inward for deals. North America led the world in dealmaking with $19.9 billion in transactions as the number of transactions rose 6.6% to 276. The Asia Pacific region saw a 9.5% decline to 67 deals amid a dampened appetite for investment in the region, R3 said.