Marketing M&A may be set to cool with the creeping economic downturn, but a few noteworthy deals have gotten in under the wire. Last month, ad agency Mekanism was snapped up by Plus Company, a Quebec-based holding group that formed in 2021 and owns other entities like We Are Social and communications shop Citizen Relations. Financial terms of the transaction were not disclosed.
The move marks a major U.S. expansion by Plus Company, whose model mirrors other newfangled ad networks like Martin Sorrell’s digitally-oriented S4 Capital. Around the Mekanism announcement, Plus Company also appointed former Accenture Interactive chief Brian Whipple — known for an aggressive dealmaking strategy during his tenure at the management consultancy — as board chair.
For Mekanism, the aim is to accelerate an expansion into performance marketing that started to take shape at the outset of the pandemic, according to co-founder and CEO Jason Harris. Mekanism now positions itself around “soul and science,” embodying a blend of the creative and technology-driven sides of the industry that clients have increasingly demanded amid digital’s ascent and mourning pressure to tie marketing to concrete results.
“It took us about 20 years to grow [Mekanism] and we don't want to wait another 20 years to double it and create that full-funnel offering,” said Harris. “We want to do that in a few years.”
A full-funnel approach
Mekanism was incorporated in 2003 and today employs about 200 people across offices in San Francisco, New York, Chicago and Seattle. The agency generated $50 million in annual net revenue the last fiscal year, The Wall Street Journal reported.
With the Mekanism acquisition, the U.S. now represents 30% of Plus Company’s revenue, including contributions from other businesses the group owns. The firm aims to triple revenue in the region over the next four years. That’s a tall order but one Harris hopes can be realized through an approach that extends beyond a historic focus on creative strategy.
“The first thing we're going to do is strengthen our performance team, and then add some technology capabilities to the business,” said Harris. “Step two would be e-commerce and [customer relationship management] capabilities.”
Mekanism was already diversifying its toolkit in recognition of an evolving marketing landscape. The company once operated a number of sub-brands and agencies, including the social media-focused Epic Signal, but streamlined its organization earlier in the pandemic while ramping up its performance marketing initiatives. The Mekanism performance team currently has seven members, but Harris said it “needed to go bigger” to fully realize the “science” aspect of its mantra.
The shift toward performance has brought in some big account wins since 2020, including Quaker, Weber Grills, Betway and GoodRX, per Ad Age. The company has notched a pitch win rate of 75% so far this year.
“What was attractive to [Plus Company] is that we have such a high-profile brand in the U.S.,” said Harris. “Because of where we were going with our new positioning, it matched where they're going as a network. Even though we haven't realized the potential of it yet, we were heading on the same course.”
Though the overall outlook on deal activity is chillier in the face of a looming recession, future purchases could be in the cards for Mekanism with a strong investment partner. Plus Company is backed by private equity firm CVC Capital Partners.
“We're going to build out the lower funnel through either investments and hiring or acquisitions that we tuck under Mekanism,” said Harris. “Plus Company is going to allow us to do that.”
Finding a ‘fourth path’
While Mekanism was actively seeking out acquisition partners, Harris was firm that a transaction would only happen under the right conditions. It first entered discussions with Plus Company toward the start of 2022.
“If we didn't find the right fit, we weren't going to do a deal just to do a deal,” said Harris. “For us the most important criteria was, can we keep our brand operating as-is?”
The executive outlined a number of routes the shop could’ve taken: Integrating into an established ad-holding group, where Harris saw strategic value but expressed concerns about getting “lost in the mix” of hundreds of agencies; making a pure private equity play, which lacked a sense of strategy in Mekanism’s thinking; or opting for a newer model like S4, which held its own appeal.
However, S4, Accenture Interactive and other challenger networks have moved recently to unify their agency holdings in a bid at better cohesion and to avoid repeating the mistakes of their sprawling legacy competitors. Plus Company skews most closely toward this emergent category but opened a “fourth path” where Mekanism would get access to capital and digital expertise but keep its own name and branding, according to Harris.
Though the partnership represents a happy medium in terms of Mekanism’s goals, it’s still an adjustment from the more free-wheeling independent status on which the agency built its name.
“When we're on our own, no one's expecting our growth. We're not a part of something bigger,” said Harris. “So if we grow a little bit or we stay flat, no one's gonna really notice. Now as part of [Plus Company], they have a real charter for growth because there's a private equity company behind them.”
That opens opportunities that Mekanism wouldn’t otherwise be able to realize, but also a greater degree of pressure — all as recessionary fears mount, though marketers often turn to lower-funnel strategies to weather a downturn.
“I had like a 24-hour breather and now I feel like I'm running a big portion of the business in the U.S. and we have to triple our growth,” said Harris. “I know we're gonna do it. We have a lot to do.”
Correction: A prior version of this story misstated how the Mekanism acquisition has affected Plus Company's U.S. business. The holding group now derives 30% of revenue from its properties with a U.S. presence.