2021: Will Nigerian advertising industry adopt the M&A option?

FEW days ago, Sir Martin Sorrell’s S4 Capital,  a United Kingdom-based advertising group, announced its decision to start  off the new year on a very strong note, when it disclosed  the acquisitions of New York-based creative agency, Decoded Advertising, and San Francisco-based marketing agency,  Metric Theory.

Sorrell, in an interview with a foreign marketing communications journal, Adweek, had described the deal as part of the  group’s  plans to take the industry by storm, this year.

“We think that 2021 will be a very strong rebound year for the world economy,” Sorrell had said ahead of the public announcement of the deal.

The above development and the breaking of another year, no doubt, provide practitioners and other stakeholders in the nation’s advertising space, the opportunity to reflect on some of the issues the industry has had to grapple with in the past few years.

Interestingly, one of such,  is that of collaboration in form of merger and acquisition, among players in the industry, as typified by  the Sorrell’s S4 Capital example above.

Not a few analysts and even practitioners are of the opinion that events of the last few years have made the need for collaborations among  players in the multi-billion naira industry, more than ever before, pertinent.

The industry, they argue, is underperforming, considering its huge potential, but mild contributions to the nation’s Gross Domestic Product.

For instance, despite being the largest economy in Africa,  with a GDP of $397 billion, the contribution the nation’s economy could only muster from its advertising sector a  paltry $450 million, less than one per cent of its GDP.

Interestingly, the South African scenario brings this home more vividly. With the country’s economy ranked as the second largest in Africa, with a GDP of $366 billion, the South African advertising sector is valued at $2.6 billion, about seven per cent of the nation’s GDP, in spite of having a population far less than what obtains in Nigeria.

More worrisome is the advent of the second wave of the Covid-19 pandemic, which is proving more ferocious for individuals and businesses around the globe.

“I agree there is need for a new thinking if we want to remain relevant as an industry,” argued Mrs. Bunmi Oke, the Chief Executive Officer of Ladybird Communications.

The  former President of the Advertising Agencies Association of Nigeria (AAAN)  believes merger and acquisitions are not out of place, in an evolving sector such as the nation’s advertising space.

“I believe it should be part of the evolving processes in the sector. For instance, while I’ll not say the industry needed collaborations, because it is ailing, I will however say such collaborations are needed as part of the evolution  the industry is witnessing.

“The industry is a reflection of the bigger economy. We all know that the  nation’s economy is in recession. When the economy bounces back, the industry  will also bounce back,” she stated.

Bunmi Oke however argues that, while collaborations are highly welcome in the industry, since they come with a lot of benefits, they are, however, not new, because the industry had witnessed such in the past.

The president of the Outdoor Advertisers Association of Nigeria (OAAN), Mr. Emma Ajufo, believes merger and acquisitions are possible among practitioners in the sector.

“Even some have already commenced the process, so it is not something impossible. I think it would go a long way in giving a boost to the industry. It’s the way to go, especially at this period,” he added.

The Group Chief Executive Officer of Noah’s Ark, Mr. Lanre Adisa, in exclusive interview with Brands & Marketing, stated that  M&Qs are not strange to the sector. He however believes such cases are not as rampant due to what he described as ‘ego factor’, among practitioners.

“But my take is that is it not better to control 40 per cent of something than having 100 per cent of nothing?  I think the issue of collaborations is not new to the industry.

“For instance, it is an open secret that that was what we did when we were starting Noah’s Ark, years ago. We looked for a small agency that already had AAAN membership to acquire. And this made the acquiring agency, the Noah’s Ark, an automatic member of the AAAN,” he added.

Adisa insists the benefits are numerous. For instance, it provides the opportunity for operators to pool together resources and also address skill gaps. For him, it is a win-win situation for the industry.

Soothing, no doubt, that the industry believes collaborations could be one of the panaceas to its waning influence.  But, whether the industry will look the way of such collaborations  in 2021, remains to be seen as the new year unfolds.

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