S4 Capital, the marketing and technology services firm established by Sir Martin Sorrell, this morning confirmed it has entered talks with fellow marketing business MSQ Partners over a potential deal to combine the two companies.
News of the talks was first reported by Sky News, and promptly confirmed in a statement authorised by Sorrell. The statement confirms that S4 Capital has received a proposal from MSQ, which is majority owned by private equity firm One Equity Partners. But it added that a deal, if one were to be agreed, would be structured as an acquisition of MSQ by S4 Capital, rather than the other way round.
S4 Capital says the talks are at a very preliminary stage, with no certainty that a deal will be reached.
Suitors lining up
There have been a number of reports over the past year or so of potential suitors expressing an interest in buying S4 Capital, at a time when its market value remains far below its 2021 peak.
The business, built from a shell company which Sorrell took over after exiting WPP back in 2018, is focussed specifically on the digital part of the industry. S4 Capital rapidly grew in size through a series of major acquisitions including Media.Monks and MightyHive, and signed on a number of major blue chip clients. But its share price has fallen by over 95 percent since October 2021, as revenues have been hit significantly by reduced spending from tech clients, which account for a substantial part of S4’s business.
Stagwell, another UK-based marketing group, is among those said to have made a merger offer, but Sorrell is reported to have rebuffed previous offers. Today’s news shows that S4 Capital is actively considering major tie-ups, even if talks are still very early.
MSQ, like S4 Capital, places a lot of emphasis on technology and the digital side of the business, which would likely be important for any businesses S4 might combine with. Sorrell frequently points to the growth in digital media compared with traditional media when discussing S4’s purely-digital model.
It houses 13 agencies across 22 global offices, with more than 1,800 staff. Agency brands owned by MSQ include media agency Walk In Media, creative agency The Gate, design consultancy Elmwood, sports and entertainment agency group MSQ Sport + Entertainment, and digital optimisation consultancy MMT.
Such an acquisition would add significant scale and new capabilities to S4 Capital. But MSQ’s client list, which includes Mars, P&G, Unilever, Lego, Haleon, Diageo, Burger King, and Vodafone, could also be valuable, helping dilute the proportion of S4 Capital’s revenues which come from tech clients.
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