U.K.-based digital agency LBi has acquired youth-marketing shop Mr. Youth for approximately $40 million.
"Demand [in social media] is massively outstripping the supply; all of our clients are asking for it," LBi Group CEO Luke Taylor told Ad Age . "It's tough to scale organically, so we were looking for acquisitions. Of course you go to the [United] States -- this is where Facebook and Twitter were born, so it's uncontroversially the best place today to get the best skills."
Founded in 2002, private-equity backed Mr. Youth is expected to clear $25 million in revenue this year. It has 140 full-time employees, mostly in New York, with small offices in San Francisco, Toronto and Atlanta.
Built into the deal are performance incentives, allowing for further compensation beyond the $40 million sale price provided the agency exceeds performance targets.
Mr. Youth's expertise in the youth market will be a boon to LBi, Mr. Taylor said, during a time when the larger agency is reorganizing around customer segments. LBi already has a practice to target health-care professionals, and going forward plans to build units to reach millennials, moms and multicultural audiences.
LBi plans to keep the Mr. Youth brand following the sale. Mr. Youth co-founder-CEO Matt Britton will continue to lead Mr. Youth, but will now function in a dual role, also taking on a position at LBi for social media. He will report to Mr. Taylor.
Over the last several years, LBi has been looking to build its presence in the U.S. by buying its way into the market. Early last year, it merged two past New York agency acquisitions, Special Ops Media and Icon Nicholson, and combined the offices under the LBi name.
After nearly a year looking at social-media shops, LBi approached Mr. Youth, which was also attractive because of its intellectual property , including a tool to incentivize college students to become advocates for brands called RepNation.
LBi International had $233 million in worldwide revenue last year, with almost 20% originating in the U.S., according to Ad Age Data Center. LBi has offices in 16 countries and that global footprint was a draw for Mr. Youth, whose client roster includes major multinationals like Coca-Cola, Microsoft, Ford Motors and Procter & Gamble.
"We're now running up against the larger more established agencies," said Mr. Britton. "We've grown out of the small-agency bucket and there are things we want to do to sustain our growth."