Cossette and the rest of the Vision7 agencies have new owners (but the same boss) after a deal that sees its Chinese-based former parent Blue Focus spin off its international agencies to form a new company called Blue Impact.
Blue Focus retains 44.4% of Blue Impact, while the rest of the company will be controlled by Legacy Acquisition Corp. and its partners, with Vision7 head Brett Marchand named the new CEO of Blue Impact.
Legacy is a new business in the agency holding company game, but run by a team of experienced marketers with deep roots in consumer goods, and P&G in particular. Legacy is investing more than $300 million in Blue Impact, and the deal values the new enterprise at $587 million. The combined agencies have about 2,500 employees and approximately $500 million in revenue, and the new owners were clear their target is $1 billion.
Aside from Vision7, the new company will include We Are Social, the U.K.-based social marketing specialists; San Francisco product design firm Fuseprojec; Hong Kong-based full-service agency Metta; and Shanghai-based programmatic mobile experts Madhouse.
In announcing the deal Friday, Legacy said that since forming in 2017, it looked at more than 370 possible acquisitions before settling on the Blue Impact deal.
“[W]e have identified a leading global platform,” said Edwin Rigaud, CEO of Legacy. “The agencies that will form the Blue Impact business, together, form a leading and rapidly growing advertising and marketing services platform and are well-positioned to capitalize on the confluence of several major marketing trends: the rise of mobile, digital and social communications, the advance of data-driven media and marketing.”
The digital focus was a core theme of the announcement and the call with analysts on Friday. Digital represents 63% of revenue for the new Blue Impact entity, and the company said it expects those digital sectors of the industry to grow at 15% CAGR through 2021. To get a better understanding of the implications of the deal, both short- and long-term, The Message spoke with Blue Impact’s new CEO, Brett Marchand.
Why do this deal now?
“Probably the most important [reason] is to have access to capital,” he said. “One of the challenges for Blue Focus International the last couple of years is—being a Chinese publicly owned company—is it’s challenging getting capital out of China,” he said. The deal includes approximately $176 million of cash for acquisitions and working capital.
How will that capital be used?
“To grow the business, to expand internationally—to open offices to hire people ahead of revenue,” he said. “So we will expand our agencies. We already have a bunch of examples: We bought Eleven and we helped them open in Chicago. We Are Social just opened in Madrid and in Japan. So expanding our current roster takes capital.
Second is growth through acquisition. “There are a bunch of markets where we are going to need to make an acquisition to be a serious player,” he said. China and Canada are the only two markets Blue Impact considers itself a market leader in its core capabilities, with the rest of Asia/Pacific and the U.S. singled out as priorities in the investor presentation.
Will you be adding a data company?
“We are not likely to buy data,” he said. The Blue Impact leaders believe that software and, more importantly, strong analytical skills are what counts most these days rather than buying a data firm. “Data is a commodity, frankly,” he said. “Talent, who can use data to help clients is a luxury. That is one of the things you get with great media agencies and great one to one agencies is people who understand how to use data.”
But Blue Focus almost bought the data firm Cogint in 2017.
Yes, but it pulled out for a number of reasons, said Marchand. “One of the key issues is that they were sitting on first-party data. We don’t need a lot of first-party data, it comes with a lot of headaches.”
When you sold Vision7 to Blue Focus in 2014, you said expansion to the U.S. was a priority. How would you assess your performance?
“I would say we have been successful, but not as quickly as we’d like to be,” he said. “And that’s where capital will help.”
“We’ve got a much bigger portion of our business in the U.S. than we ever had, 42% of it. It used to be less than 5%. But frankly, we gotta go quicker.”
On the analyst call you talked a lot about digital and a lot about media. But not much about creative. Why?
“I should have. That was a mistake,” he said. “I’ve been a huge supporter of the creative revolution at Cossette, and I’m super proud of it… That presentation was for investors, right? If there were 21 [marketing reporters] on the phone, I would have talked about creative for a third of the presentation. It’s critical.”
So what if any are the practical implications for Cossette?
“Cossette has the runway room to grow in a whole bunch of countries in the world,” he said. “It was difficult for us to go launch in France or Japan or other countries where I think Cosssette could be super successful, but that takes investment.
“Those countries are hypothetical, but international growth for Cossette for sure is part of the plan.”
How do you get to a $1 billion?
“Well you continue to grow at our current growth rate [of] 17.7%—it doesn’t take that long to get to $1 billion. You add acquisitions on top of that, and expand in some key geographies, it could happen pretty quickly.”
