One week after Publicis completed a deal to buy the data and insights business Epsilon, WPP has sold the majority of its data and insights business, Kantar.
Bain Capital is acquiring 60% of Kantar in a deal that values the business at US$4 billion—roughly 8.2 times its 2018 EBITDA.
While retaining a 40% share of the business, WPP will receive a cash infusion of $3.1 billion, with about $1.8 billion going to debt and about $1.2 billion going back to shareholders, who have seen the value of their WPP stock drop by half in recent years.
“We see significant upside in WPP, which we think has a collection of very attractive assets,” said analysts Liberum in a research note obtained by CNBC. “Fundamentally, we do not believe the agency model is broken, more that WPP has to readjust itself to the changes that have occurred and reduce its reliance on the traditional media business to drive profits.”
Since taking over as CEO following the rancorous departure of long-time CEO Martin Sorrell last year, Mark Read has sought to simplify the WPP business and cut debt while investing in creative and technology. The Kantar deal fits that mandate, and is noteworthy for being a distinctly different strategy to that of WPP’s major competitors, which have increased their data holdings in recent years.
WPP will retain a significant stake in Kantar, and its leadership emphasized on Friday that the holding company remains very much focused on data, although that focus no longer focuses on data ownership. While data has become increasingly important for marketers and their agencies, analysts have generally regarded Kantar as under-performing. The deal with Bain is expected to see new investments to improve performance.
“Kantar is a great business and we look forward to working with Bain Capital to unlock its full potential,” said Read in the release announcing the deal. “As a strategic partner and shareholder in Kantar, WPP will continue to benefit from its future growth while our clients continue to benefit from its services and capabilities.”
“We see many opportunities for expansion and will invest in technology to expand the company’s capabilities and reinforce its global leading position,” said Luca Bassi, a managing director at Bain Capital Private Equity.
“Data is critical to WPP’s clients and critical to WPP, but there’s a growing number of sources of data,” Read told reporters Friday, adding that WPP would focus on “data-driven marketing rather than data ownership.”
Aside from Kantar, WPP points to Wunderman Thompson as a key source of consumer and transaction data, and GroupM for data about audiences and campaigns.
WPP’s stance is somewhat at odds with rivals such as Publicis, Interpublic and DentsuAegis, all of which have all made large investments to expand data offerings. Publicis spent $4 billion on Epsilon specifically so it could own more first party data.
In an interview with CNBC in Cannes last month, Kantar CEO Eric Salama explained the benefits of owning data rather than just renting access.
“From our point of view owning first party data is absolutely critical,” he said. “Everything we do is permission based. Our panels are built that way, people have said to us ‘We will share the data with you’ and in a GDPR world that kind of first-party data is critical. It allows us to offer services that you can’t through third party data.”