Martin Sorrell’s new holding company, S4 Capital, just snatched Dutch digital production agency MediaMonks from the clutches of his former team.
Terms of the deal were not disclosed, but The Wall Street Journal reports S4 agreed to pay about $350 million for the agency. Clarity Partners in London and JEGI in New York advised on the sale.
Sorrell had fierce competition for MediaMonks from his holding company competitors, including WPP, said Tolman Geffs, co-president at JEGI.
“It was a difficult choice [for MediaMonks], to be clear,” Geffs said. “But Sir Martin is building something new from the ground up, with an enormous amount of credibility and success. They’re going to be an important part in shaping that company.”
S4’s deal for MediaMonks is structured differently than many past WPP acquisitions. Whereas WPP typically offers agencies a variable buyout based on performance, S4 will provide MediaMonks with a mix of cash and shares but no earn-out.
Interest in MediaMonks among the holding companies started heating up in January. As the largest global digital production company, MediaMonks staffs 750 employees in 11 markets and boasts clients like Amazon, Netflix, Google and GE. Its annual revenues are approximately $130 million.
Digital production has become an increasingly important service area for agencies to own, especially as brands pull creative and strategy in-house. MediaMonks’ ability to execute digital production at scale made it attractive to buyers.
“What they do was, frankly, only a few years ago viewed as a commodity,” Geffs said. “Now it’s viewed as very strategic, as many brands deal directly with execution.”
MediaMonks is just the beginning for Sorrell and S4. Despite publicly stating he has no intentions to compete with his former company, Sorrell received a letter from WPP warning him that his bid for MediaMonks could jeopardize his “good leaver” status and cause him to leave roughly $26 million on the table.
But Sorrell is in it for the long haul.
“The merger represents the first move by S4 Capital to create a new era, new media solution embracing data, content and technology, which meets client needs in an always-on environment,” according to S4’s statement. “Subsequent emphasis will be placed on further platform development, data analytics and digital media buying, run on a single P&L basis, as clients are increasingly demanding.”