How UK marketing businesses are supercharging their growth with Alternative Finance

The UK marketing sector continues to experience rapid change as businesses respond to accelerating digitalisation and shifts in consumer behaviour. An increasing focus on digital marketing channels has created significant opportunities for innovative, tech-led companies to seize market share, outpacing traditional incumbents to achieve strong growth and success.  

Growth through strategic acquisition 

Last year was a record year for M&A in the UK media and marketing services sectors, according to professional services firm Moore Kingston Smith. While most deals involved the acquisition of traditional service-led agencies, a growing proportion involved businesses that have developed innovative software and technology solutions to aid digital marketing strategies, with capabilities in areas such as content, social media, and data and analytics increasingly important. 

 
Source: Moore Kingston Smith

Much of this deal flow was from a surge in interest from private equity backed buyers, attracted by the sector’s robust future growth prospects and a plethora of highly innovative tech-enabled companies with room to expand.   

For owner-managers of marketing and communications firms, private equity investment can present an attractive route to securing the capital they need to stay ahead in the tech game and achieve ambitious growth plans. It can be a particularly appealing option in this sector because it comprises so many smaller marketing agencies that are fiercely protective of their independence and culture, and so wary of being overpowered by a big industry player that might not retain those values. But there are alternatives that can also ensure continuity. 

A market ripe for ‘buy and build’ 

The UK marketing and communications (marcomms) sector remains fragmented with plenty of opportunity for consolidation. While there are some big players within the space, particularly large holding companies, they are still relatively small in terms of market share. This leaves significant scope for companies to grow via a buy-and-build strategy, acquiring smaller companies over time to add scale, boost their service offerings or expand their market reach.  

For marketing businesses looking to scale through targeted acquisitions like these, rather than organically, a popular route in recent years has been to use private equity investment as the primary source of funding. This is often undertaken in combination with debt.  

ThinCats has lent alongside private and other equity for more than 6 years. We recently helped Waterland Private Equity make a majority investment in Markettiers4DC (M4DC), a London-headquartered network of tech-enabled, data-driven, broadcast-activated, strategic communications agencies. 

M4DC operates in the global communications market, which is worth £69bn and is growing at 7-10% per annum. It faces an increasingly complex and fragmented media landscape but, at the same time, growing demand from clients for more data-led communication strategies that can improve effectiveness. With support from Waterland and ThinCats, the business is growing through an active buy-and-build programme focused on acquiring complementary communications businesses, accelerating investment in service capabilities, attracting and retaining the best talent in the industry and expanding its geographical coverage. Follow-on funding is also available to the business to support the implementation of these plans. 

The alternative: why choose debt over equity? 

The downside to private equity funding is that owners of the acquiring business must sacrifice a proportion of their equity, often giving up majority share ownership. ThinCats offers an alternative – our ‘Transitional Capital’ solution removes the need for equity by funding a larger debt quantum than usual. It can also provide committed capital to create a war chest, with funding released over time for a buy-and-build strategy. 

ThinCats recently provided additional support to global communications and digital marketing agency Clarity, for example, with funding to facilitate the acquisition of Sefiani Communications Group, the agency’s first acquisition in Asia Pacific. 

This latest acquisition follows the integration of Political Intelligence UK – one of Europe’s most established and influential public affairs agencies in October 2022 – and B2B digital marketing agency 93digital / 93x in May 2022, both backed by ThinCats. These acquisitions take the group to a headcount of more than 180 people globally and build on Clarity’s exceptional track record of achieving growth via M&A.  

Another example of a successful buy-and-build strategy in the sector is Broadlight Group, which is fast becoming a force in the B2B marketing space. ThinCats supported the company with its acquisition of Sussex-based digital marketing agency Chillibyte, its third deal in under a year as it continues to grow its portfolio of specialist marketing agencies.  

Digitalisation has been a particularly strong driver of growth in the UK Marcomms sector and, with the resultant rise of tech-enabled companies in need of investment, consolidation is likely to continue at pace.  

ThinCats recently funded Flight Story, the marketing and communication company co-founded by Steven Bartlett and Oliver Yonchev, hear how they’re supercharging their growth with alternative finance:

For businesses seeking to fund acquisitions without diluting equity, ThinCats’ transitional capital debt solution is worth exploring.