Marketing mergers and acquisitions may be about to cool off with the creeping economic downturn, but a few notable deals have been done under the wire. Last month, the advertising agency Mekanism was acquired by Plus Company, a Quebec-based holding group that formed in 2021 and owns other entities like We Are Social and communications boutique Citizen Relations. Financial terms of the transaction were not disclosed.
The move marks a major U.S. expansion of Plus Company, whose model mirrors other cutting-edge ad networks like Martin Sorrell’s digitally-focused S4 Capital. Around Mekanism’s announcement, Plus Company also named former Accenture Interactive chief Brian Whipple – known for an aggressive trading strategy during his tenure at the management consultancy – as chairman of the board. ‘administration.
For Mekanism, the goal is to accelerate an expansion into performance marketing that began to take shape at the start of the pandemic, according to co-founder and CEO Jason Harris. Mekanism now positions itself around “soul and science”, embodying a blend of the creative and technological aspects of the industry that customers have increasingly demanded amid the rise of digital and the pressure of mourning to link marketing to concrete results.
“It took us about 20 years to grow [Mekanism] and we don’t want to wait another 20 years to double that and create this full offering,” Harris said. “We want to do it in a few years.”
A comprehensive approach
Mekanism was incorporated in 2003 and today employs approximately 200 people in offices in San Francisco, New York, Chicago and Seattle. The agency generated $50 million in annual net revenue in the last fiscal year, The Wall Street Journal reported.
With the acquisition of Mekanism, the United States now accounts for 30% of Plus Company’s turnover, including contributions from other companies owned by the group. The company aims to triple its revenue in the region over the next four years. It’s a tall order, but Harris hopes to achieve it through an approach that goes beyond a historical focus on creative strategy.
“The first thing we’re going to do is build our performance team and then add technology capabilities to the business,” Harris said. “The second step would be e-commerce and [customer relationship management] capacities. »
Mekanism was already diversifying its toolkit in recognition of an evolving marketing landscape. The company once operated a number of sub-brands and agencies, including social media-focused Epic Signal, but streamlined its organization earlier in the pandemic while ramping up its performance marketing initiatives. Mekanism’s performance team currently has seven members, but Harris said it “needs to expand” to fully realize the “scientific” aspect of its mantra.
The shift to performance has won big accounts since 2020, including Quaker, Weber Grills, Betway and GoodRX, by advertising age. The company has recorded a 75% success rate so far this year.
“What attracted [Plus Company] is that we have such a prestigious brand in the United States,” Harris said. “Because of the direction we were going with our new positioning, it was in line with the direction they were going as a network. Even though we haven’t realized the potential yet, we were heading down the same path.
Although the overall outlook for deal activity is dimmer in the face of a looming recession, future buying could be in the cards for Mekanism with a strong investment partner. More Company is backed by a private equity firm CVC Capital Partners.
“We’re going to build the bottom funnel through investments and hires or acquisitions which we categorize under Mekanism,” Harris said. “Plus Company will allow us to do that.”
Find a “fourth way”
While Mekanism actively sought acquisition partners, Harris was firm that a transaction would only occur under the right conditions. He first entered into talks with Plus Company around early 2022.
“If we didn’t find the right person, we weren’t going to make a deal just to make a deal,” Harris said. “For us, the most important criterion was: can we continue to make our brand work? »
The executive outlined a number of avenues the store could have taken: integration into an established advertising group, where Harris saw strategic value but expressed concerns about getting “lost in the mix” of hundreds of agencies; make a pure private equity game, which lacked strategic sense in Mekanism’s thinking; or opt for a newer model like the S4, which has its own appeal.
However, S4, Accenture Interactive and other challenger networks have recently moved to unify their agency assets with the aim of better cohesion and to avoid repeating the mistakes of their sprawling legacy competitors. Plus Company is leaning the most towards this emerging category, but has opened up a “fourth way” where Mekanism would have access to capital and digital expertise while maintaining its own name and brand image, according to Harris.
While the partnership represents a happy medium in terms of Mekanism’s goals, it’s still an adjustment from the freer independent status on which the agency has built its name.
“When we are alone, no one expects our growth. We’re not part of something bigger,” Harris said. “So if we grow a little bit or lay flat, no one will really notice. Now as part of [Plus Company]they have a real growth charter because there is a private equity firm behind them.
This opens up opportunities that Mekanism might not otherwise realize, but also a greater degree of pressure – all as recession fears grow, though marketers often turn to lower-funnel strategies to cope. to a slowdown.
“I had like a 24-hour break and now I feel like I’m running a lot of the business in the United States and we need to triple our growth,” Harris said. “I know we will. We have a lot to do.”
Correction: An earlier version of this story misrepresented the impact of the Mekanism acquisition on Plus Company’s U.S. operations. The holding group now derives 30% of its revenue from its properties in the United States.