Waiting game
Iain Ferguson
For Iain Ferguson, chief executive at Mission Marketing , deals are like travelling on public buses, you’re waiting for ages then two turn up at once.
When Iain Ferguson joined communications group Mission Marketing as chief executive in early 2006, the group was a robust private concern turning over £47 million, with pre-tax profits of £3 million.
Nevertheless, the board had ambitious plans and hired Ferguson to take the company to the next growth stage, which included a flotation and fund raising, followed by acquisitions. Within a year, Ferguson had pushed Mission’s pre-tax profits up 22% to £3.74 million to January 2007.
He admits it’s not a bad record for someone who had never dabbled in corporate finance deal making until a couple of years ago, and that was a straightforward restructuring job.
“We were certainly pleased with our results,” Ferguson says, recalling his profitable first year at Mission Marketing. “Three or four times the market rate means we are stealing market share from someone, so it’s a good effort.”
Mission’s CEO acquired a taste for deals after helping to restructure French advertising group Havas. The company was underperforming and by 2003 its pre-tax profits were down some 50% to £33.3 million in 12 months when Ferguson hived off the loss-making elements leaving Havas with a net income of £46.4 million.
“I learned so much from restructuring Havas that I thought I’d like to do it for a living,” he says. “I enjoyed the corporate finance piece and the opportunity to buy and sell companies.”
On the strength of his success at Havas, Ferguson was taken on at Mission to grow the business. After his appointment as CEO, his first step was to hire chief financial officer Tim Alderson, former head of finance and buy-and-build strategist at marketing services group Creston plc.
The partnership was given a brief by the board to expand Mission’s services by acquiring regional marketing agencies. It was a reaction to industry trends favouring creative, cost-efficient agencies with a regional and national coverage.
When he took up the post, the group’s only brands were Big Communications and Fuse Digital. Big Communications’ segment included brand planning, strategic development, advertising and direct marketing, while Fuse Digital was a new media marketing business serving WKD, Lucozade, Greenpeace and Carlsberg.
AIM listing
The first step for Ferguson was to list the business on AIM. Three months in to his tenure, Mission issued 12.3 million shares at 120p, raising £14.8 million and valuing the firm at £24 million. Moreover, the IPO coincided with Ferguson’s first acquisition, Bray Leino, which is a healthcare focused marketing and communications agency.
Based in Devon, Bray Leino was acquired for £24.5 million in cash and shares with the value of the deal rising to £32.5 million when the business meets agreed targets. In the year to the end of December 2005, Bray Leino produced an operating profit of £3.6 million from a £42.4 million turnover.
With the first acquisition under their belt and with proceeds remaining from the flotation, Ferguson and Alderson looked for other acquisition opportunities.
“We were looking for agencies in fast growth areas like digital, healthcare, food and drink, which we already have,” Ferguson says. “Some of the other sectors that we have identified as being hot include property and IT.”
Late last year, the partners found what they were looking and agreed to acquire two more companies, with both deals closing within two days of each other in March.
Bastin Day Westley (BDW), a property and real estate marketing agency, will cost Mission up to £14.5 million if agreed performance targets are achieved. Meanwhile, the company acquired April-Six, a consultancy, marketing and communications services provider to software and telecom companies, for £19 million. Both transactions were satisfied in cash and shares and were finalised with the backing of The Royal Bank of Scotland .
Colchester-based BDW, which made a profit before interest and tax of some £1.1 million in 2006, operates under the Think BDW and Think Media brands. April-Six, which is based in Harefield, Middlesex, reported a £3 million turnover in the seven months to December 31, 2006.
Alderson admits the eventual signing off of the two deals was coincidental. “It’s rather like number nine buses,” he laughs. “Ideally you plan acquisitions once every six months, but in practice they just came together.”
Both deals originated when the group was approached by the vendors. “We know people in the industry,” Ferguson said. “If you owned an agency that was based outside London and were thinking about how next to develop the business, you would be mad not to be talking to us because that is what we are focused on and are beginning to be recognised as doing.”
The BDW and April-Six acquisitions ideally fit the Ferguson brief, which is to look for provincial agencies with multiple services and with lower overheads than those based in Central London. Mission is also keen to retain the brands while keeping the existing management teams in place. “We want them to be wholly self-contained,” Ferguson says. “Part of the value of buying them is for their brand and reputation. We have no interest in doing away with that.”
Payback
With the uptick in Mission’s financial results, Ferguson intends to use the extra cash on Mission’s balance sheet to look for more deals.
“The extra funding that we have will give us the headroom to make further acquisitions,” he says. “That is what we said we would do when we joined AIM. It is what we have done this past year – and will be doing this year and next.”
Reporting by Mark Dunne