NEW YORK (AdAge.com) -- In a rare instance of a digital agency purchasing a traditional ad network, Sapient has struck a $50 million cash and stock deal to purchase Nitro Group. The merged company will be redubbed SapientNitro.
Nitro founder and CEO Chris Clarke will be CEO of the joint agency, while Sapient's Gaston Legorburu will serve as executive director-worldwide creative officer at Sapient Interactive and SapientNitro. Both he and Mr. Clark report into Alan Herrick, CEO of Sapient, a Nasdaq-listed company that also has offerings in the IT and professional services space.
At a time when so many in adland are still struggling to play catch-up when it comes to providing clients with best-in-class digital services, it might seem odd that an interactive network would buy a traditional advertising firm. But Mr. Legorburu -- who said he's been working on inking a deal with an above-the-line agency for nearly two years -- told Ad Age the merger will help Sapient in its quest to give advertising holding companies a run for their money.
The major holding companies, which include giants such as WPP and Omnicom Group, collectively control nearly 85% of global marketers' advertising spending, Mr. Legorburu said, but "they don't get it." Together, independents Sapient and Nitro Group can do multichannel marketing and commerce on a global scale, he said.
Mr. Legorburu said the move was spurred in part by the economy. "Clients are looking to reduce fees and consolidate agencies. Huge advertisers are restructuring their rosters, moving from regional players to global players. These guys are interesting because all their clients are global or potentially global."
"I think you'll see a lot of reverse [deals] with digital shops frustrated that they can't have a deeper strategic relationship with clients," said Mr. Clarke. "I think you'll find a lot more of them looking to build their capabilities above and below the line."
Mr. Clarke also believes that independent networks are probably more acquisition-ready. "Most of the holding companies have got debt and they've gotta work through the debt issues and probably consolidate what they've bought over the past few years."
The Nitro Group handles marketing for blue-chip clients such as Mars, ConAgra, Volvo and Nike, and until recently handled key brands for Kraft Foods. Sapient's marketing-services group, Boston-based Sapient Interactive, does work for brands including Celebrity Cruises, Vodafone and Sony Electronics. It is also believed to be among a select group of shops that will soon be named to package-goods giant Unilever's digital roster.
From a geographical perspective, Sapient -- which has a footprint in North America, Europe and Asia -- is getting from Nitro a strengthened presence in Asia (Nitro was founded in Shanghai), as well as the South American and Australian markets.
Sapient numbers 6,000 staffers, and 50% of its revenue is from marketing services; the deal will push that up to about 60%. Nitro has about 400 worldwide.