Stakeholders express divergent views on calls for mergers & acquisition in the IMC industry

By Kasim Bakare

Stakeholders in the Integrated Marketing Communication (IMC) Industry have expressed divergent views on the call for mergers & acquisition as a panacea to the dwindling fortunes of agencies amid the gloomy business climate imposed by Covid-19 and global economic realities.

Mergers  and  Acquisitions(M&A)  refer  to  business  transactions  in  which  the  ownership  of organizations or their operating units are transferred or combined. Although M & A are still a relatively new business strategy in Nigeria, the most prominent one was the fallout of the consolidation policy of the Central Bank of Nigeria(CBN) in  2004, where the  then 89 banks in the country with weak capital bases, had to embrace M & A to meet the N25 billion capitalization requirement for banks in the country. In the end, the number of banks in Nigeria shrunk to 25.

In  the  advertising industry,  a  highly competitive  and innovative  sector,  there has  been  no visible case of  M & A, except probably the acquisition of the erstwhile Complete Advertising Services (CASERS), by DDB, a renowned global advertising agency. At best, what has been taking place in the industry has been affiliation, a situation where a foreign but globally renowned agency goes into a business relationship with a Nigerian agency.

In recent times, the call for mergers & acquisition in the IMC industry has been rife considering the damage done to an already hemorrhaging sector by the Covid-19 and other economic realities which have reduced the survival capacity of the agencies forcing many to go under. How desirable is the call for mergers & acquisitions in the industry?

Responding to MARKETING EDGE’s inquiries on the call for mergers & acquisition in the IMC industry, GMD, CMC Connect BCW, Yomi Badejo-Okusanya(YBO) said:

“I am a complete advocate of mergers & acquisition. I have told people that the future of this business is specialization, mergers & acquisition. I will tell you one thing that has driven my position on this matter. The question is: Do I want to be a big fish in a small ocean or would I rather be a small fish in a big ocean? I choose the latter because there is more room for me to play. Every one of us in marketing Communication must restructure our business. For instance, as a small agency, you have been given the business of Mobil to handle and you are still struggling with it. Is it when you are now given the business of ExxonMobil that you will be able to handle it?

He added: “The different capacities must come to the table irrespective of your specialization. That is the only way succession can happen. If we go the way we are going right now, most of us are building companies and not institutions. Usually, most companies die before their owners die”.

Asked whether his PR agency is thinking in the direction of mergers and acquisition, YBO noted that the agency has started a journey of ensuring the company outlives him and grows to be a legacy brand..

Hear him:” My own personal vision is that wherever CMC is, many years after now, I would rather drive past it or they invite me for what they are doing and I would be proud of it than for me to stand at a point and say” I was a part of a team that once had a company called CMC Connect”.

Jude Odia, MD,Starcom Media Perspectives, reiterated that the drop in revenue and income of agencies have reduced their capacity to flourish and build capacity to consummate mergers & acquisitions.

“As we speak today, the total adspend in the country is not exactly where it should be in terms of total earnings and probably revenue and income. As at the last count, we do in a bit less than N150 billion, sometimes less than a N100 billion, total annual in Nigeria. Last year, I am sure it would be below a N100billion. That kind of number doesn’t guarantee a flourishing industry for marketing communication agencies. So, the question of mergers and acquisitions can only come If the business is booming and there are huge revenue and profit projections and realizations that big networks in Nigeria can say we are sure of this kind of profit year-on-the year. Then, they can start looking at the muscle to acquire the smaller agencies. But as it is today, the industry is rather going more come-of the ties, the big agencies formatting to fight the smaller agencies because the market is a red ocean now”.

Speaking further, Odia noted that agencies are fighting for survival and competitive advantage and it is really tough to begin to talk about mergers & acquisition. Asked what alternative would be desirable in this situation, he had this to say:”What I will recommend, rather is the fact that we collectively as an industry begin to work towards increasing the total pie, making our industry much more relevant, making the value and the solutions and service offerings  we offer much more competitive and value-adding to potential clients and existing advertisers. Then we should also look at our pricing regime and our competitive model so that we can heighten or increase what the possible revenue could be for us in the industry. Overtime, I believe some or few of these networks locally would begin to distinguish themselves and start looking at younger one that has a DNA-fit. That’s what happens globally and that’s for me is critical in the furtherance of our industry in Nigeria

Tolulope Medebem, MD/CEO Aster Integrated Marketing Limited(AIML), a foremost experiential marketing agency, slightly disagrees with the call for M&A in the industry alluding to the issue of trust in such business relationship. According to her, while the preponderance of agencies poses a big challenge, partnerships might be more desirable to avoid frictions and distrust.

Her words:” Honestly, the present situation isn’t helping the industry especially with the advent of so many ‘agencies’ (for want of a better descriptor). But then, the flip side brings to fore trust issues more than anything else (this is from a personal view point)”.

She added:So as much as mergers and acquisitions might work (might being the key word because it might actually not be the solution), another solution or option, might then be partnerships (partnerships between agencies) –  Coming together, offering certain services or expertise (even within the same ‘sector’) and ALL working together as a team to deliver on EXCELLENCE. But, I guess it’s convenient to ‘own’ your successes (failures) personally.

She added:”At AsterIML, we have had cause to partner with other agencies (mostly ATL though) to pitch / present on experiential campaigns and based on agreed details, we run the course and do a great job, guiding and directing each other”.




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