As the ad industry and holding companies increasingly hone in on media, data and technology, an unlikely suitor is backing creativity: private equity firms.

Multiple PE companies struck agency deals in 2024, including Svoboda Capital and AEA Investors. Several firms have also been circling R/GA, according to multiple people close to the situation. Interpublic Group of Cos. has been trying to sell the digital agency for several months. R/GA declined to comment on PE firms’ interest.

PE firms are set to continue spending in the year ahead, according to multiple M&A experts interviewed by Ad Age, especially given favorable macroeconomic conditions, including less regulation anticipated under the new Trump administration, dry powder (a surfeit of uninvested capital) and lower interest rates.

There are several other factors, too. After making investments in other complementary areas, PE firms are now interested in rounding out their revenue streams with some creative firepower, experts said. And the steady emergence of AI—which is helping agencies save time and money—is helping assuage some longstanding concerns about risk. 

Also read: IPG expected to sell R/GA to management-led group backed by private equity

What’s changed

After throwing money behind performance marketing, tech and digital businesses over the past five to 10 years, PE firms have “hit a wall,” said Michael Seidler, founder and CEO of M&A advisory firm Madison Alley. 

The traditional model was for indies to seek investment or a sale to holding companies or other agencies, but now more of them are opting to sell to PE firms, according to Seidler. PE companies, meanwhile, are investing further in creative agencies to combine them with more tech-focused shops already in their portfolios, creating a more appealing offer for both clients and potential buyers, he said, citing as examples Tinuiti, Brainlabs, and Wpromote.

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There is particular interest in hot shops, which, when added alongside complementary agencies already in a PE company’s portfolio, can help make their overall revenue more consistent.

“What we’re seeing is that a key piece to the overall mix is creative services, or creative agencies,” added Johnathan Tann, a partner at Spring Advisors, an M&A advisory firm that worked with Highdive to broker its deal in which the Chicago-based creative agency received an investment from Chicago-based Svoboda Capital Partners. (Highdive previously told Ad Age that, with Svoboda Capital, “there are no expectations” to acquire or merge with other agencies.) 

And, perhaps unsurprisingly, AI’s impact on creativity is also playing a role. The technology, which is helping boost creative output while also saving shops time and money, is prompting PE firms to consider new investments, according to Lori Murphree, managing partner at Evalla Advisors, a company that advises on M&A. “There’s a huge opportunity” for PE firms, she said, “and the risk averseness they’ve had, they’re kind of getting over.”

“The AI component definitely adds something,” she added. 

It’s not just the agency, but its talent, that is a draw for PE shops. Investing in creative agencies gives these companies access to people who are leveraging AI “at the highest level,” said Peter Lang, co-founder of PE firm Ava Acquisitions, which is also eyeing investments in experiential shops. 

One consultant, speaking on the condition of anonymity, highlighted Carlyle Group, Svoboda Capital and Together Group (the last of which is backed by Pricoa Private Capital) as companies seeking more deals with agencies. Multiple industry insiders also pointed to Mountaingate Capital, which has already invested in multiple marketing-focused shops, including Mars United Commerce, as another to watch. 

Also: Publicis Groupe acquires Mars United Commerce

“We continue to look for unique agencies with differentiated strategies and great customers,” said John Svoboda, a managing director at Svoboda Capital. “We continue to be interested in small, niche agencies that might fit with our existing agency partners, as well as larger new ‘platform’ opportunities that don’t conflict with our current agency partners.” In addition to Highdive, Svoboda Capital’s portfolio includes North Carolina shop The Variable, public affairs agency Bully Pulpit International and full-service agency Marcus Thomas.

Asked about investment plans, Together Group CEO Christian Kurtzke said it was seeking to acquire more creative agencies and aims to “create the best full-service group of talent for driving transformation in the luxury and lifestyle sectors.”

Carlyle Group and Mountaingate Capital did not return a request for comment.

Why agencies are open to deals and what they should know 

Independent shops are also more willing to entertain capital from PE, which is becoming more comfortable letting agencies steer the ship, according to experts. “There’s an evolution in private equity,” said Joanne Davis, founder of Joanne Davis Consulting. “There’s some that want to be more silent investors.”

Unlike holding companies, which typically acquire agencies outright, PE firms can structure deals that allow executives to retain ownership stakes, an approach that helps retain talent and incentivize future success, said Mark Williamson, a partner at law firm Lathrop GPM.

“We’re seeing people, as long as they get the promise of minimal intervention, are really open” to deals, said Ava Acquisitions’ Lang.

There are certain steps agencies should take when assessing their deal options, such as hiring a third party to facilitate negotiations. Before agreeing to terms with Svoboda Capital, Highdive had conversations with other agencies in the PE firm’s portfolio, said Megan Lally, CEO of the Chicago agency, who called the process valuable in helping vet a potential deal. It’s essential to find a firm that understands the marketing services business, particularly how financials fluctuate based on projects and account changes, Lally advised. “Otherwise, you’re going to spend a lot of time explaining what’s going on,” she added. 

Highdive said Svoboda Capital isn’t operationally involved in the business, despite the firm making an undisclosed “significant investment” in 2024.

To be sure, not every PE firm is completely hands-off. Chicago-based PE firm Keystone Capital brought the idea of a merger to Barkley and OKRP and now owns an undisclosed “slight majority” of the combined BarkleyOKRP. Keystone invested in Barkley in September 2022 to help the Kansas City, Missouri-based agency find M&A opportunities. 

Also, not every firm is in it for the long term; PE firms look for distressed assets that they can grow and flip.

In October, IPG classified R/GA and Huge as “held-for-sale” and recorded a non-cash goodwill impairment expense of $232.1 million, which essentially meant that the agencies were likely to be sold for less than the amount at which IPG valued them, presenting a potential upside for a buyer. (Huge sold in December; R/GA is still looking for a suitor). With both agencies, it would make sense for a PE firm to buy low and cut costs, as both shops are “inefficient,” said an M&A advisor speaking on the condition of anonymity.  

“PE is always looking to buy low and sell high,” this person said, “and if they bought high, it means they think they could sell it even higher.”