Office Hours: M&A in a post-pandemic world
The way we work is rapidly evolving. In a matter of months, the pandemic has forever changed how we communicate, where we conduct business, the technology we use and how we juggle home and work life. There’s also been a much-needed spotlight thrown on the makeup of the workforce and the efforts being done to make the ad world a more-inclusive place. Every Thursday, Ad Age will tackle a different issue regarding the way these changes are impacting our professional lives—from mental health and wellness to creating new jobs, re-imaging the leadership ranks and what the new office space will look like.
M&A goes remote
Last week, Mediaocean, an advertising software company, purchased the marketing technology company 4C in an effort to keep up with the changes in TV buying. The deal entirely took place—from the initial offer to close—amid the pandemic, making for a vastly different deal-making environment and perhaps providing lessons for the future of M&A.
Mediaocean CEO Bill Wise was preparing to leave New York City on March 13, the day much of the country went on lockdown. In an effort to see how other companies were handling closing their offices, Wise reached out to several CEOs, including 4C’s chief Lance Neuhauser. During that conversation, Neuhauser told Wise that 4C was looking to raise another round of financing.
“The whole weekend I kept thinking about it and I called him back Sunday night and said maybe we should have a discussion,” Wise says.
What initially started as a financing conversation turned into Mediaocean making an offer for a controlling stake in the company. While it would seem closing such a deal in the midst of a pandemic would be a challenge, Wise says in some ways it was more efficient and cheaper than in typical times. “The cost to execute this deal was a fraction of what it normally is,” he says.
The deal-making process, which includes plenty of fees for lawyers, accountants, bankers and consultants doing diligence, adds up to what Wise estimates is about eight figures worth of additional costs.
All diligence, including code reviews, financial reviews and accounting reviews, were conducted 100 percent virtually. With 4C having offices in Seattle, Chicago, New York, Singapore and London, Wise says if this had been a deal pre-COVID, he would have been flying all around the country, and potentially the world. “It got done quicker because it was done virtually,” he says. From the time Mediaocean signed the agreement of exclusivity to the time they signed the purchase agreement was one month. Wise says this normally would have taken three to four months.
But there is a caveat. Wise says Mediaocean wouldn’t have been able to do this deal if the company didn’t already have a relationship with 4C—the two partnered in 2017. So Wise not only has a relationship with Neuhauser, but also knows much of the 4C team. “There is a zero chance of doing a strategic acquisition of this size during a pandemic if we didn’t know each other,” Wise says. “Those relationships made this possible.”
Moving forward, Wise expects two types of M&A deals amid the pandemic. The first are fire sales of companies that don’t have the balance sheet to manage through the downturn in the economy. “I am starting to see reach-out from bankers asking us to take a look at a deal, and it is companies hit by the market,” he says. Then there are the strategic deals, with companies taking the opportunity from the fact that the industry is at an inflection point where transformation is happening and consumers are consuming differently. Wise says that’s what 4C was for Mediaocean. “Those can only happen if there is an existing relationship between two companies.”
Now Wise is tasked with integrating the two companies while everyone is still working remotely. Typically, this would involve bringing the offices together for happy hours and other events. Wise says often cultural integration happens naturally as people speak to each other. In lieu of this, Mediaocean and 4C have been hosting virtual water-cooler conversations with senior management, and plan to do three of these every week.
For Wise, the experience of closing an acquisition in a pandemic has left him to question the ROI on several usual business practices, such as flying all over the world. “Seeing how efficiently we have done this deal will make me question the level of costs moving forward,” he says. “Why would I ever fly to the middle of the country for one meeting?”
While he doesn’t believe offices should live in the cloud, he is rethinking travel, entertaining and conferences.
Latest in layoffs
Wieden+Kennedy is the latest agency to lay off employees as a result of the pandemic. It will cut 11 percent of its workforce worldwide, reports Ad Age’s Lindsay Rittenhouse and Judann Pollack. The move by W+K, which topped Ad Age’s 2020 Agency A-List and has been a standout in the industry, shows that no organization is immune to the impact of COVID-19.
Other reports of layoffs include: NBCUniversal, which according to the New York Post is expected to be hit with widespread cuts; and LinkedIn, which plans to eliminate 960 jobs as the coronavirus has slowed the demand for the company’s recruitment tools.
Dinners at home
Joan Creative co-founders Jaime Robinson and Lisa Clunie discussed how the agency world will change post-COVID in an interview on Ad Age Remotely on Tuesday. The agency is re-thinking how its office space will be used moving forward. “Instead of it being compulsory that everyone has to work from 44 Wall Street, I think it is going to operate more like a clubhouse,” Clunie said. When a team has to meet because they are pitching something or working on a project, they can reserve the space. In this way, Clunie said everyone can find their own ideal way of working.
For parents, this includes shifting hours to work later in certain instances. “Lisa and I talk a lot about this and it was kind of a revelation when we went into lockdown, she and I were like, 'I can’t remember the last time I had dinner in the weekdays with my family,'” Robinson said. “In some ways that has been quite a blessing and I think it will be something we are reluctant to give up when we go back eventually. There is no reason why you can’t be home to be with someone you love or go to a movie or hang out or go to a bar or whatever it is you need to do in the evening and still work in this job.” Robinson said this will be something we need to fight for as an industry when things go back. “The old times of [thinking] you need to burn yourself out in order to be successful, that now feels stupid.”
Robinson and Clunie also discussed how the industry needs to challenge systemic racism in hiring practices, which includes tying bonuses and reviews for hiring managers to their success in bringing in diverse voices. You can watch the full interview here.
Long live Summer Fridays
Summer Fridays certainly look very different than years past. Gone are the days where a short workday meant an early happy hour or the ability to leave early to head to the beach for the weekend to miss rush-hour traffic. Despite radically different summer Fridays amid the pandemic, employers are still getting creative in enabling workers to enjoy these days, including giving employees the ability to log off after lunch and encouraging outdoor activity, according to Bloomberg.
We want to hear how you and your employer are handling summer Fridays. Email me at [email protected].
That does it for this week's Office Hours. Thanks for reading and we hope you are all staying safe and well. For more industry news and insight, follow us on Twitter: @adage.
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