Vin Murria’s investment firm, AdvancedAdvT Investments, laid out its plan to acquire M&C Saatchi through a reverse takeover but received an immediate and negative response from the independent directors of the agency group, who said it did not “benefit shareholders”.
Both sides said they made their statements “without prior consent” from each other in what appeared to be a sign of significant tension, particularly given that Murria is already the largest shareholder in M&C Saatchi and is a member of its board of directors.
AdvancedAdvT, a listed acquisition vehicle, laid out its bid for M&C Saatchi in a 7 a.m. stock market announcement Friday (January 7), saying it wanted the group of agencies to focus on “data, analytics, and digital” and ramp up mergers and acquisitions.
Investment firm Murria said it sees “significant value” in the agency sector, citing “outperforming and valuing data-driven digital marketing agencies and peer consultants.”
This is believed to be a reference to UK-listed companies S4 Capital and Next 15 as well as other global firms from Accenture to You & Mr Jones, which are challenging legacy agency groups and have been highly acquisitions.
AdvancedAdvT proposes a “stock exchange merger” with M&C Saatchi to create an “expanded” company with greater financial resources and additional management experience.
Murria, which previously raised £130m in money, did not provide details on how to structure a potential deal, but has suspended its shares over the takeover proposal.
M&C Saatchi said AdvancedAdvT will offer each M&C Saatchi shareholder 1.86 new AdvT ordinary shares for each M&C Saatchi ordinary share.
M&C Saatchi is understood to be worth around £220 million, based on the AdvancedAdvT share price.
Shares of M&C Saatchi surged from about 167p to 210p during the first part of this week when AdvancedAdvT interest first appeared, but it has fallen about 10% to about 185p on the back of the proposed exchange merger, as it indicates there will be no outright buy or cash offer.
Independent directors see few advantages in Moriah’s proposal
Moriah, a former software entrepreneur, knows M&C Saatchi well because she has served as Vice Chairman since 2021.
M&C Saatchi’s other non-executive directors, led by Chairman Gareth Davis, responded in a statement at 3 p.m. Friday, saying they see little merit in her proposal at this time.
“The initial opinion of the independent directors is that this all-share proposal does not articulate an alternative strategy for the benefit of the company’s stakeholders beyond the initial change of control of M&C Saatchi,” they said.
“Furthermore, the proposal does not reflect the value and future prospects of the business and will disproportionately transfer the value of equity from shareholders of M&C Saatchi to shareholders of AdvT.”
They added, “It is not clear to the independent directors how shareholders and other stakeholders will benefit from dilution of ownership and a change in the leadership of the company’s board of directors.”
AdvancedAdvT responded: “We have great appreciation for the business of M&C, its management, and its board of directors. We look forward to the opportunity to discuss our proposal and address the points raised in today’s statement with the M&C Independent Committee.”
M&C Saatchi, which is headquartered in Golden Square in Soho, London, was launched in 1995 as a spin-off from Saatchi & Saatchi.
The advertising agency group reported steady growth as it expanded internationally through a network of entrepreneurs from local agencies, rather than mergers and acquisitions, and expanded into areas such as performance marketing, public relations and talent management over the next two decades.
The group was shaken by accounting irregularities in 2019, which led to a mass exit from the boards of directors and a plunge in shares from 330p to just 30p at the start of the pandemic.
Murria, who made her money from her previous company, Advanced Computer Software, which she built through 14 acquisitions, has become a growing influence at M&C Saatchi.
It controls about 22.5% of the shares. It has a 12.5% stake in personal, which it acquired for 40p a share in 2020, and AdvancedAdvT acquired a 10% stake at 200p a share at the beginning of this month.
The latest share price purchase — at a premium of nearly 20% to where the stock was trading — fueled speculation about a potential bid and led AdvancedAdvT to announce its takeover plan.
Focus on data, analytics and digital
AdvancedAdvT said: “The merger, combined with a focus on data, analytics, and creative digital marketing strategy as well as mergers and acquisitions, will enable the expanded group to take advantage of the growing opportunity to ‘navigate, create and drive meaningful change’ while guiding companies on a new digital journey.”
“It will defend M&C’s traditional creative base against disruptive competitors and enable the expanded group to increase its market share against its peers. The merger will also enable M&C to solve the old put option problem. [as local agency entrepreneurs have earn-outs that need to be paid in shares] As well as providing funds to accelerate business investment and digital M&A-led transformations.”
AdvancedAdvT, whose management team includes several of Murria’s longtime colleagues from Advanced Computer Software, noted that it “brings additional management skills with significant experience and expertise to complement, accelerate, and grow the expanded portfolio through strategic and staggered acquisitions in segmented international markets”.
AdvancedAdvT added that Murria’s management team “has demonstrated past success in identifying, realizing and harnessing the inherent value within companies”.
“Combining the M&C brand and platform with the company’s financing and expertise is expected to increase the opportunities for mergers and acquisitions. The combined reach and renewed appeal of the platform can attract more high-quality assets.”
AdvancedAdvT noted that M&C Saatchi was lagging behind competitors because it wasn’t more aggressive about mergers and acquisitions.
“The outperformance and evaluation of data-driven digital marketing agencies and peer consultants demonstrate investor support for companies that are successfully taking advantage of perceived market opportunities. Other digital marketing groups have successfully used mergers and acquisitions to gain digital power.
“We see a significant opportunity for the expanded group, with acceleration of data, analytics, digital strategy and joint oversight, to achieve similar valuation multiples, improve equity liquidity, and implement a gradual reintroduction of dividend policy that we believe will enhance the business’s attractiveness to investors.”
Although Murria gave no examples, Sir Martin Sorrell’s S4 Capital has won more than £3 billion since its launch in 2018 and made more than two dozen acquisitions.
Murray McLennan has been CEO of M&C Saatchi since January 2021. The company has more than 2,500 employees and operates in 23 markets, including Australia, South Africa and the United States.
He pushed the strategy of simplification and digitization and doubled the stock price last year, before the AdvancedAdvT approach.
M&C Saatchi has also won clients including Uber, Google, TikTok and Tinder as well as new assignments from existing clients including
Private property support
AdvanceAdvT declined to go into details of its intentions or plans for Campaign But several industry watchers, speaking in private, suggested that Moriah had carefully planned its course.
Murria is a “very good worker” and “tends to get her own way,” according to two ad industry figures who know her and who have speculated that she might take the group especially if the acquisition succeeds.
Marwyn Capital, the private equity firm, is one of the backers of AdvancedAdvT, having previously backed Murria at Advanced Computer Software.
A person familiar with financial markets, but not involved in setting up M&C Saatchi said: “AdvancedAdvT is a private equity-backed company, so [if it succeeds in taking over M&C Saatchi] They will consider selling the company at a later time.
“They will be able to fund agency acquisitions and get equity but I’m not sure it will be to the extent required to reach S4 Capital levels. The AdvancedAdvT statement says they will make deals but it’s not clear if they will be fragmented or enthusiastically transformative.”
When Murria built Advanced Computer Software, she set it up as an acquisition and initially purchased a management software company for £12 million in 2008 before going on with another 13 acquisitions.
Profits for Advanced Computer Software before Extraordinary Items, known as Ebitda, increased from £1.8m at the time of the first acquisition to £48.5m in 2014, before selling the company for £750m in 2015.
She was also a non-executive director of Chime, the owner of VCCP, before it was sold to private equity in 2015.