Iconic Canadian agency Cossette could be poised to change hands for the second time in five years, with reports that a Chinese marketing communications firm is close to acquiring assets from parent company Vision7 International.
Greg Paull, a principal at Hong Kong-based R3 Worldwide – a marketing consultancy that has been advising Beijing-based BlueFocus Communication Group on potential acquisition targets for the past few years – told Marketing Thursday that the company has been in discussions to acquire the Vision7 assets from owner Mill Road Capital for the past several months.
Vision7 turned down a request for an interview, providing this statement from CEO Brett Marchand: “In July 2014, it was announced that Mill Road started to review strategic alternatives for its majority holdings in Vision7 International’s North American assets. That process is continuing and we are unable to comment further at this stage.”
Vision7 International is comprised of three divisions: Cossette, Vision7 Media and marketing-services division EDC, which has offices in both Europe and North America.
The deal does not appear to include any of Vision7’s European assets. However, asked to clarify which assets would be included in any transaction, Paull said he could not go into specifics.
BlueFocus has a stated goal to grow tenfold in the next decade, with international expansion expected to be a key contributor. The company has seen explosive growth in recent years, with a 2010 listing on the Shenzhen Stock Exchange creating a sizeable war chest for M&A activity (the company has a reported US$3.5 billion market cap).
Following a Chinese buying spree that saw it acquire more than 20 companies, BlueFocus began expanding internationally last year. Its first acquisition was a US$60 million deal for a 20% stake in London PR firm Huntsworth Group, followed by the US$30 million purchase of a majority stake in another London company – social media agency We Are Social.
It finally cracked the U.S. market in July, purchasing a 75% stake in Fuseproject, a San Francisco-based design and branding firm, for a reported US$46.7 million.
“Cossette is one of the others they’re looking at right now,” said Paull, whose firm has connected BlueFocus with Mill Road Capital and other North American agency groups.
Connecticut-based private equity firm Mill Road said this summer that it intended to pursue “strategic alternatives” for Vision7, noting that the company’s management supported the decision and would play a “major role” in the process.
For Sale
This is the second time in just six weeks that a potential suitor for Vision7 has arisen. In mid-October, reports surfaced that Res Publica, the Montreal-based parent of PR firms National Public Relations and Cohn & Wolfe, was in talks with Mill Road.
Speaking on condition of anonymity, one agency president said a Res Publica deal made sense, particularly as PR agencies continue to bolster their ranks with former creative leaders.
Earlier this year, for example, Edelman hired Taxi’s former executive creative director Jordan Doucette as its ECD, while Hill+Knowlton Canada hired former Bimm associate creative director Chris Davies as its national creative director.
“It sounded like a really plausible possibility,” said the agency head. “Major public relations firms globally are all expanding out of traditional PR. They’re building traditional creative skills and resources, they’re building out their social media practices, their digital capabilities.
“There’s a huge blurring of lines going on between what PR firms do and what ad agencies do, so I saw this step by [Res Publica] as being entirely consistent.”
Res Publica also declined comment when contacted by Marketing. “We mentioned at the time that those were rumours,” said executive vice-president Valérie Beauregard, in an e-mail response. “Our firm’s policy is not to address rumours.”
Paull, meanwhile, said the Vision7 assets represent a good strategic fit for BlueFocus. The diversified asset mix – which includes creative, PR, a strong media offering, as well as design and social media – makes it a particularly attractive target, he said.
“We looked at a lot of different companies in North America, from Canada to the U.S., really focusing on strategic competency and digital capability, [but] really the main thing was a good cultural fit,” he said. “Cossette ticked the boxes in most of those areas and that’s why they moved forward.”
He suggested BlueFocus was also attracted by Cossette’s growth from humble beginnings into a major agency group, a trajectory the Chinese company has followed since its 1996 formation.
“Cossette has had such a strong position in Canada for several years, so I think it’s a natural fit for them,” he said. “It’s quite a diversified business with a lot of parallels and synergies.”
Asked if a deal was close to being finalized, Paull suggested an announcement could come before the end of the year. “Unlike a lot of other groups, they’re quite quick in their processes,” he said. “They move a lot faster than some of these other holding groups.”
He said other deals are likely forthcoming for BlueFocus, which has expanded from PR beginnings and now works with several multinationals including Pepsi, Microsoft, Audi and BMW. “They’ll definitely make other moves in North America,” he said. “This won’t be the last acquisition over the next six months – there’ll definitely be others.”
BlueFocus was ranked 16th on the 2014 edition of the Holmes Report’s World PR Report, with fee income of $123.4 million last year. It is said to be keen to crack the top 10, which would require a significant influx of new billings – the 10th place agency on the list, Havas PR, had fee income of $209 million last year.
Reports have pegged the sale price for Vision7 at between $200 and $220 million, which represents a significant increase over the $115 million Mill Road paid for Cossette in 2009.
While speculating that a private equity firm would have done a good job of stripping out costs from the company, the unnamed agency head questioned an $85 million increase in valuation for the agency. “Unless they made some major acquisitions or landed some really big clients we don’t know about, that number doesn’t make any sense,” he said.
