S4 Capital, a UK-based digital marketing and advertising group, has established a “robust” acquisition pipeline to help it expand into new territories, Chief Growth Officer Scott Spirit said.
The company, which comprises a content and a programmatic division, will make add-on deals over the next 12 months to enter new markets including Spain and India, Spirit said. S4 could also make smaller acquisitions to develop content divisions in existing territories, including Australia and Germany, where it currently has only programmatic divisions, he added.
S4 will also make acquisitions to expand its advertising and marketing services aimed at high-profile clients, Spirit said, which include Google. This may involve expanding its client base in the ecommerce market and in the data and analytics sector, Spirit said. The company is also looking to strengthen its existing partnership with Salesforce.com, he added.
Future acquisition sizes will mirror previous deals, Spirit said, without disclosing specific numbers. Last month (8 October), S4 announced plans to acquire California-based digital marketing company Firewood for around USD 150m (GBP 116m), as previously reported.
S4 may launch an equity placement to fund to fund larger deals in the next year, Spirit said, and could consider expanding its debt to pursue its acquisition strategy. Its net debt averaged around GBP 30m in 3Q19 and it has an estimated GBP 70m further capacity before it reaches its 2x EBITDA debt target, according to a stock exchange announcement.
The company prefers to offer both cash and equity to potential targets to encourage the existing company’s management team to “buy into the S4 philosophy”, Spirit said.
In 2019, S4 bought Brazil-based programmatic solutions consulting firm ProgMedia, Amsterdam-based film production studio Caramel Pictures and influencer marketing company and a technology company, BizTech. These came on top of its acquisition of programmatic ad company MightyHive for USD 150m in and its purchase of Dutch agency MediaMonks last year.
S4 Capital announced yesterday (4 October) that its revenue in the three months to 30 September rose 54% year-on-year to GBP 56.6m, while gross profit rose 50% to GBP 42.1m. Revenue from its content division rose 48%, to GBP 41.1m, while revenue from its programmatic operations, which automate the buying and selling of adverts, was up 71%, to GBP 15.6m. It had a GBP 776.46m market capitalisation.
S4 Capital has operations in 26 countries across Americas, Europe, the Middle-East and African and Asia Pacific, according to its website. It lists its competitors as US media company Omnicom Group and UK-based advertising conglomerate WPP, Spirit said; and competes with Accenture, Deloitte and private equity firms for potential targets, he added.
The company’s largest shareholder is its CEO and ex-WPP chief, Sir Martin Sorrell, while Toscafund Asset Management holds around a 10% stake in the company, according to Morning Star. It uses Travers Smith as its legal advisor and BDO as its accountant, Spirit said.