What: Advertising company Publicis Groupe is acquiring Sapient, a digital agency and communications company, for US $3.7 billion in an all-cash transaction. Publicis is also creating Publicis.Sapient, a new organization that will house all of Publicis’ digital and technology-focused assets including Razorfish, Rosetta and DigitasLBIs.
Why it matters: Sapient will help Publicis go deeper into digital offerings and online activities, and bounce back from its failed attempt to merge with Omnicom Group Inc. The acquisition fullfils Publicis’ goal of deriving 50% of its revenues from digital marketing and technology services. Publicis recently announced a 20% investment in performance marketing firm Matomy. Sapient owns Hispanic and Latam ad shop La Comu.
After a failed attempt to merge with rival Omnicom Group Inc., advertising company Publicis Groupe will acquire Sapient, a digital agency and communications company, for US $3.7 billion in an all-cash transaction . This is Publicis’s second acquisition in less than a month after acqacquiring programmatic platform RUN and and taking a 20% position in performance marketing company Matomy Media.
Both companies’ boards have approved the offer and Alan Herrick , CEO of Sapient, will become CEO of the new Publicis.Sapient that will house all of Publicis’ digital and technology-focused assets — including Razorfish, Rosetta and DigitasLBI — and be focused exclusively on digital transformation.This is the first time also, that all Publicis’s digital assets and digital agencies are line up under a whole unit.
Sapient stockholders will receive US $25 in cash for each share. Publicis is paying 19.2 times Sapient’s earnings before interest, taxes, depreciation and amortization. That compares with a multiple of 14.5 times for similar targets over the past five years, according to Bloomberg.
“This deal dramatically changes the profile of our group. We will get access to new revenue streams and markets. We’ve been investing for many years in digital capabilities for one simple reason: it’s the future,” Publicis CEO Maurice Levy said.
Publicis will finance the purchase with cash and borrowings, without selling shares as the company received a firm financing commitment from Citigroup Inc. The transaction is expected to be completed in the first quarter of 2015.
A shift in Strategy
Publicis is pushing the company deeper into digital offerings following a shares decline of 17% this year. Sapient, owner of SapientNitro, a leading digital advertising agency, would push Publicis further into online activities. Publicis will add nearly 13,000 Sapient people to its existing staff of 62,000, and many of them are experts in everything digital, including designing websites, coding and analyzing data to better target ads to consumers.
Through its Global Markets division, which serves industries such as banking, energy and finance, Sapient has an existing consulting practice that may extend to other categories and provide advisory services around marketing technology and strategy. Publicis is shifting the majority of its digital activities to the newly created Publicis.Sapient, including DigitasLBI, Razorfish and Rosetta.SapientNitro’s biggest clients includes Unilever, Vail Resorts, and Queensland Tourism. Sapient employs about 13,000, and its 2013 gross revenues were US $1.3 billion. Net profits were about US $77 million. As of 2013, about 70% of its business came from its digital agency, SapientNitro. Another 25% was attributed to Sapient Global Markets, serving the capital and commodity market needs of clients in the financial and energy industries.
It will also give Publicis Groupe access to new markets and creating new revenue streams. This acquisition fulfills many of Publicis Groupe’s objectives
“Sapient is a ‘crown jewel,’ that will give Publicis Groupe access to new markets and creating new revenue streams. This acquisition fulfills many of Publicis Groupe’s objectives: we will enhance our leadership position in digital, achieve our goal of deriving 50% of our revenues from digital and technology three years ahead of our 2018 plan, and leverage technology, consulting capabilities to expand in new verticals, and offering new and exciting opportunities to our talents,” Levy said in a statement this morning.
“What we will do over time is expand the vertical consulting presence within Publicis.Sapient in order to cross-pollinate, in order to feed the other pieces of Publicis.Sapient and have deep expertise in vertical segments in which we operate to help clients construct solutions to take advantage of opportunities. You’ll see us both deepen as well as expand the types of consulting we do,” said Sapient CEO Alan Herrick.