Publicis Acquires LBi – Digital Marketing M&A Continues on Furious Pace

Last week, Publicis announced that it had acquired LBi, one of a few independent digital marketing agencies with global scale remaining in the highly fragmented marketing industry. Publicis paid $540 million in an all-cash deal, representing 2.2x revenue and nearly 20x EBITDA (reportedly beating Omnicom in the bidding). The purchase price represents a strong premium to the market, even despite concerns over the economic environment in Europe where the majority of LBi’s revenue is derived.

Amsterdam-based LBi employs approximately 2,200 employees across 32 global offices. The deal bolsters Publicis’ digital operations by bringing the contribution from the digital business to over 35% of total revenue, which is in line with its strategic goals. The announcement follow’s Publicis’ acquisition of Rosetta last year as well as other deals which include Digitas and Razorfish in previous years.

The LBi deal comes at a time when M&A activity across the marketing space is nearing peaks. Earlier this year, WPP acquired AKQA (a direct competitor of LBi) for $540 million, which represented 2.9x revenue. Additionally, Dentsu recently announced the acquisition of Aegis Group. With LBi off the table now, there are not many independent global agencies of scale remaining with the exception of a few such as Profero and SapientNitro. While M&A activity across the sector will likely continue, we expect the deal sizes to shrink dramatically given the smaller nature of the remaining competitors.