COM­ING FROM BE­HIND, RE­GION­ALLY SPO­KEN

Executive Magazine - - Companies & Strategies -

The im­por­tance of dig­i­tal has def­i­nitely not been lost on WPP. Re­cent an­nual as­sess­ments of world­wide merger and ac­qui­si­tion (M&A) trends in the com­mu­ni­ca­tions in­dus­try by New York-based in­vest­ment bank and M&A con­sul­tants Coady Diemar cite WPP as one of the most ac­tive ac­quir­ers in the dig­i­tal space for more than two years, com­pet­ing for in­or­ganic growth lead­er­ship against ad group ri­vals Publi­cis and Dentsu but also against tech con­tenders such as Google, Face­book and Ya­hoo!. In their lat­est pub­lished as­sess­ment of the in­dus­try in the first half of 2015, Coady Diemar says that M&A ac­tiv­ity in dig­i­tal me­dia, in­for­ma­tion and tech­nol­ogy saw a 24 per­cent year-on-year in­crease within an over­all vi­brant global mar­ket for ac­qui­si­tions; it added that strate­gic ac­qui­si­tions in the first six months of last year rep­re­sented more than two thirds of an­nounced trans­ac­tions with avail­able data. Trans­ac­tions at­trib­ut­able to pri­vate equity in­vestors in­creased from 21.7 per­cent in the first half of 2014 to 32.5 per­cent of an­nounced trans­ac­tion val­ues in the same pe­riod in 2015.

WPP ap­peared ex­tremely ea­ger to ex­pand its dig­i­tal foot­print, as ev­i­denced in var­i­ous fi­nan­cial news re­leases posted in 2015 on the WPP web­site. News re­leases from the five last quar­ters un­til end 2015 showed close to 20 items on ac­qui­si­tions or in­vest­ments into dig­i­tal agen­cies and more than 10 items on in­vest­ments or ac­qui­si­tions of com­pa­nies fo­cused on data and CRM an­a­lyt­ics. Ac­cord­ing to those re­leases, the group has al­ready passed the 30 per­cent mark of dig­i­tal con­tri­bu­tions to its $19 bil­lion global turnover and aims to in­crease the share of dig­i­tal from 36 per­cent, or $6.9 bil­lion, of its an­nual rev­enues in 2014 to 40–45 per­cent in the next five years.

How­ever, th­ese ra­tios are still quite far for the ad­ver­tis­ing in­dus­try in MENA. De­spite loads of chat­ter over the al­leged cat­alytic role of dig­i­tal com­mu­ni­ca­tions in the Tahrir up­ris­ing and other Arab Spring events five years ago, MENA has been a lag­gard in dig­i­tal mar­ket­ing com­mu­ni­ca­tions when com­pared with other world re­gions. This late­ness, which has been dis­cussed in many a re­gional ad­ver­tis­ing in­dus­try gath­er­ing of the past five years, has been quan­ti­fied in es­ti­mates of dig­i­tal ad­ver­tis­ing at around 10 per­cent of the MENA ad mar­ket in 2014. tal agen­cies that Cleartag will, ac­cord­ing to Had­dad, be a part of. Mirum, with its head of­fice in Hong Kong, says on its web­site that it has pres­ence in 20 coun­tries and 46 of­fices. Not only does nei­ther count yet in­clude Le­banon and Beirut at time of check­ing in late De­cem­ber but, more tellingly, the only Middle East pres­ence of a Mirum com­pany un­til the end of 2015 was the Dubai of­fice of UKbased HeathWal­lace, a dig­i­tal spe­cial­ist which WPP ac­quired in 2008 and which ex­panded into the United Arab Emi­rates in 2013.

In the over­all pic­ture of its in­vest­ments into com­pa­nies in emerg­ing economies, WPP, ac­cord­ing to its fi­nan­cial news re­leases, seems par­tic­u­larly hun­gry for dig­i­tal mar­ket share in places such as China, In­dia, Brazil and South Africa. Com­bined with ac­qui­si­tions of dig­i­tal and data ca­pa­bil­i­ties in ma­ture mar­kets, WPP creates an im­pres­sion of over­all dig­i­tal ex­pan­sion­ism in which the Cleartag story looks like but one, and not very large, stone in the group’s com­mu­ni­ca­tions and mar­ket­ing mo­saic.

SE­CRECY ON CASH VAL­U­A­TIONS

This anal­y­sis of the rather hum­ble po­si­tion of Arab mar­kets and Le­banese dig­i­tal providers in re­la­tion to trends in the global ad­ver­tis­ing in­dus­try does not make the Cleartag trans­ac­tion less in­ter­est­ing, how­ever, and es­pe­cially does not sub­tract any­thing from the part­ner­ship’s role as an ex­am­ple that other dig­i­tal agen­cies in Le­banon might seek to fol­low.

In this re­gard, the ra­tio­nale and the re­ward of an en­tre­pre­neur­ial com­pany’s sale are two is­sues of pri­mary in­ter­est to other mem­bers of an en­trepreneur­ship ecosys­tem. For Da­jani and Had­dad,

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