Ipsos eyes up 'new frontiers' following Synovate acquisition
Ipsos' half a billion pound acquisition of Synovate from Aegis could be seen as a risk in these difficult economic times but, says Ipsos MORI chief executive Ben Page, "it's a risk worth taking".
Ben Page: Ipsos MORI chief executive
The £525m deal, the largest in the Paris-based company’s history, was completed earlier this month creating the third largest market research firm globally.
Ipsos and Synovate were the fifth and sixth largest worldwide in 2010, with revenues of $1.5bn and $888m respectively, according to the Honomichl report on the top 25 global market research groups.
The completed deal will put Ipsos in third place globally, ahead of GfK and IMS Health, with Nielsen at number one with revenues last year of almost $5bn and WPP’s Kantar in second place.
Page says that the two companies’ combined clout will allow Ipsos to compete more successfully as a global player, particularly with its increased footprint in fast-growing markets such as Africa and Asia.
"[The joined companies will have] much better coverage in Africa, which is one of the new frontiers. Synovate has got brilliant coverage in Africa which Ipsos doesn’t have.
"They are also incredibly strong in Asia-Pacific which is one of the fastest growing regions; again, we were strong there, but now we are going to be really formidable. If you want the heft to negotiate against TNS, WPP, Kantar, that is now there.
With many potential clients enjoying growth in these emerging and developing markets, the deal is one that makes sense for Ipsos’s continuing ambitions.
"Looking at the major buyers of research globally, their growth is coming in Asia and increasingly in Africa and Latin America. We were very strong in Latin America, we were not strong enough in Asia and we were not strong enough in Africa. This deal gives us that strength to compete on a more level playing field for some of those multi-million pound contracts," adds Page.
The Synovate acquisition is the latest in a long line for Ipsos since the turn of the century. Between 2000 and 2008, it bought 44 companies and opened 16 new offices around the world, including, in 2005, the UK-based MORI for £88m.
And the Ipsos Synovate purchase is not the only major acquisition in the market research space in recent years, with Sir Martin Sorrell’s WPP buying TNS for £1.1bn in October 2008.
"There are reasons why there has been consolidation in the global market research industry and that’s because ultimately that’s what the market dictates," says Page. "It wouldn’t be happening if the market didn’t allow it to happen or didn’t encourage it to happen."
As with any acquisition of this scale, there is inevitably a period of adjustment as cultural differences are overcome, but Page believes the company’s experience of integrating businesses and the cost-cutting at Synovate while under Aegis’ control will ease the transfer.
Following the retirement of founder Adrian Chedore in 2009, Synovate, which was rebranded from Aegis Research in January 2003, has had "a different path in the last couple of years which has been much more about controlling costs," says Page.
"Our spend on R&D, on central services, is about 6% of our global turnover; their spend is about 3% and to be honest, that’s probably a bit too little.
"So there’ll be more money in the combined entity to spend on innovation and new products than they’ve had in the last couple of years, which is important in this market as you’re either distinct or you’re extinct."
And being welcomed into the fold of a company purely focussed on research should help ease the adjustments that have to be made.
"Because they were owned by an advertising and communications group, they are really positive about joining a company that is a pure play research company; that’s our strength and they are now joining people who are really into research, rather than working for a PLC that is into something else."
The deal was announced on 27 July this year and approved by Aegis shareholders on 16 August. Now it is complete, the plan is for implementation to move apace, with experience from other acquisitions in the market research space informing decisions.
The two companies will operate separately for the rest of the year but by February 2012 will be "co-terminus - one team, single heads" operating under the Ipsos name, says Page.
"In a few years, the majority of people won’t know whether they were Ipsos or Synovate".
Of the industry overall, Page does not see it becoming more aggressive as a result of the acquisition, arguing that the pressure has been on since the start of the economic downturn.
"There’s huge pressure on margins in our industry as in most industries, particularly since 2008, and that pressure is unrelenting. One of the things about this deal is it gives us more scale and therefore some economies of scale, as the overall overheads of the two business will be lower combined than they were separately.
"Competition is already fierce and it will stay fierce. Prices certainly aren’t going up however much we might like them to. Some smaller players might see some smaller opportunities. A lot of the work of Ipsos, as with many of the other companies around the world, is actually national. The global status of the company means you have more reach and scope and expertise around the world, but ultimately it’s how good you are in that country, says Wood.
How good the combined entity proves to be will play out over the coming months and years but Page is ready for the scrap.
"I hope to give my friends at Kantar and TNS a run for their money."
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