Dive Brief:

• S4 Capital, Martin Sorrell's holding company, acquired Shanghai-based creative agency Tomorrow and plans to merge the shop with its MediaMonks digital production group, according to news shared via email with Marketing Dive. Financial terms of the deal weren't disclosed. 

• The move aims to expand MediaMonks' operations in China, the world's second-biggest advertising market after the U.S. Tomorrow brings 50 employees into the S4 fold, along with blue-chip clientele including Burberry, Budweiser, Beyond Meat, Coca-Cola, Starbucks, Crocs and Red Bull. 

• The acquisition is the third so far this year for S4, a potential sign that mergers and acquisitions in the marketing world may be ramping up again after stalling during the early days of the coronavirus pandemic.

Dive Insight:

S4's acquisition of Tomorrow is another sign that the holding company started by Martin Sorrell, the founder and former CEO of advertising giant WPP, isn't wasting any time in putting money to work in the new year.

S4 last week bought creative agency Decoded Advertising to expand MediaMonks in the U.S., along with acquiring performance marketing agency Metric Theory to fold into its programmatic company MightyHive, Adweek reported. In addition to expanding through acquisitions, S4 has a broader goal of doubling revenue organically by 2023, according to its most recent earnings report. 

Rogier Bikker founded Tomorrow in 2015 to focus on integrated brand and social media campaigns in China, whose online advertising market grew 17% to $107 billion last year, per an estimate by Credit Suisse. The investment bank forecast 18% growth for the region for 2021.

Bikker will serve as managing director for the combined Tomorrow and MediaMonks group, which will operate under the MediaMonks banner until S4 creates a unified brand, Campaign reported. MediaMonks' business in China grew 45% last year, while Tomorrow saw double-growth, according to the report. 

S4 is generally acquisitive, following the growth playbook Sorrell enacted to turn WPP into an advertising empire. Still, S4's amount of deal activity just two weeks into the year is noteworthy, and suggests M&A may broadly pick up again after the pandemic triggered a slowdown last year. The industry showed signs of consolidating well before the health crisis, which led agencies to focus more inward on cutting costs and reducing headcount rather than pondering acquisitions.

The pandemic has lasted longer than initially predicted last spring, when dealmakers were optimistic of a stronger recovery after mergers and acquisitions fell to a seven-year low in the first quarter of 2020. Dealmaking by other companies will help to confirm whether S4's acquisitions indicate that M&A activity is generally on the upswing.

S4's moves reinforce the group's laser focus on digital and online marketing, which have remained some of the the most promising areas of growth during the pandemic. Consumers have expanded their consumption of digital media while stuck at home, and shopped online more frequently while avoiding stores.

Those trends are likely to have a lasting effect. U.S. digital media spending this year will grow 18% to $130 billion, making up 54% of the total $240 billion media market, WPP's GroupM estimated. Total spending will rebound 12% this year on pent-up demand, before settling to a more typical growth rate of 4.8% in 2022, according to the forecast.