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Publicis to Acquire Sapient for $3.7 Billion

martinwolf Transaction Analysis

Financial Information

  • Enterprise Value: $3.3 Billion
  • EV/LTM Revenue: 2.4x
  • EV/LTM EBITDA: 18.7x

Transaction Facts

  • French advertising company Publicis Groupe SA (PUB.PA) announced today that it had agreed to acquire digital advertising specialist Sapient Corp. (Nasdaq:SAPE) for $25 per share, or approximately $3.7 billion in cash.
  • Publicis has made many acquisitions in the digital advertising space over the last eight years, including significant players such as Digitas, Razorfish and Rosetta. This deal would be its largest acquisition in the digital space since it acquired LBi for approximately $500 million in 2012.
  • Publicis’s most recent major attempt at M&A was a failed $35 billion merger with US-based rival Omnicom, which was originally expected to close by the end of 2013 but fell apart earlier this year after much disagreement and uncertainty.
M&A Key as Competitors Seek to Differentiate
  • Getting Out of the Shadow: Publicis’s prolonged failed merger process was a lasting distraction for the company, and according to them is largely responsible for Publicis underperforming its rivals in terms of sales growth. The company is also being spurred into action by revenue shortfalls from digital components such as Razorfish and tough competition for professionals by major web rivals. With this deal, Sapient’s top 30 managers have agreed to stay in “long-term commitments,” helping secure experienced human capital.
  • Changing Space Means Changing Demand: The traditional advertising business model is significantly shifting, especially as digital and data analytics-oriented firms move into roles traditionally filled by creative teams. Sapient, which originally helped build websites, has in past years bought mPhasize and Nitro Group LLC to strengthen its own advertising capabilities.
  • Aiming High: Sapient has historically traded at a high multiple compared to its peer group, and in this transaction commanded a significant premium (44% over Sapient’s closing price Friday and 80% higher than its closing price two weeks ago). Publicis expects the transaction to achieve $62.6M in annual synergies within 3 years and boost its digital revenue to 50 percent of its total revenue – but some analysts have questioned whether the price truly reflect’s Sapient’s value as a component of Publicis. After the transaction was announced, Publicis closed down 2.26%.

For more information, view the press release by clicking here. martinwolf was not the advisor in this transaction.

 

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