Over the course of this week, Prolific North has detailed almost 250 transactions that have taken place over the past six years in the creative industries of the North. This is a sector which is increasingly ambitious and which in turn is being offered an expanding range of growth options and advice from an increasingly interested professional and financial community based in the North.

The circa 250 deals which the corporate finance transactional database Zephyr has tracked for us vary from substantial deals such as Apax’s 2014 £600m acquisition of the Trader Media Group (Autotrader), the £95m final purchase of the media buying agency Carat by Aegis, Jaywing’s £18m acquisition of its Leeds digital neighbour Epiphany and Paris-based Canal+ Groupe’s £30m stake in Red Productions.

mergers-and-acquisitionsAt the other end of the spectrum are dozens of six-figure investments in more modest companies employing a dozen or so staff but which are all characterised by their collective desire to grow their businesses and increase value.

Fortunately for creative industries companies in the North, the national appetite for investment in people businesses, particularly creative industries people businesses, is more pronounced than arguably it has ever been. And with IP values to the fore across production and broadcast companies, digital agencies and content providers, there is also more financial leverage and variety of finance available to Northern companies on their home patch than ever before.

One striking example of this is a new IP fund being developed by the financier and co-owner of Flix Facilities, Paul Hardman. The fund which Hardman is working on and is confident of bringing to the market over the next year is aiming to have between £10m to £15m of funds to invest in companies with attractive IP assets.

The idea of such a fund based in the North just a few years ago would have been risible but the imminent arrival of a such a dedicated and chunky fund speaks volumes about the seismic changes taking place both in the creative industries of the North, but also of the level and quality of local financial support which is emerging.

Jonathan Simms, a partner with Clarion Solicitors

Jonathan Simms, a partner with Clarion Solicitors

Jonathan Simms, a partner with Clarion Solicitors in Leeds, says: “This is a sector that is booming and as well as developing home grown talent within an agency, mergers and acquisitions can provide a great opportunity to bring in fresh ideas, new clients and new in-house service lines. And the good news is that the funding options for mergers and acquisitions in this sector are increasingly accessible and more varied than previously available.”

M&A remains the largest part of the transactional market, accounting for around 85% of all deals, and since 2010 there have been an average of 30 M&A deals per year involving Northern media companies, and marketing services companies are the most actively traded sub sector of the creative industry.

According to Knight Corporate Finance’s Kinga Drzewieka: “This latest analysis paints a positive picture in terms of media M&A trends for the North. Overall the deal numbers have been consistent since 2010. Northern creative companies are attracting interest from trade and financial buyers, but there is also a healthy level of deal making by Northern media acquirers searching for opportunities abroad.”

A detailed analysis of the M&A deals which anchored the research for this feature can be found here. 

Knight Corporate Finance's Kinga Drzewieka

Knight Corporate Finance’s Kinga Drzewieka

Printing is the second largest media subsector in the North in terms of deal volumes, with a 27% share of the M&A market since 2010, and notable deals have included York Mailing acquiring WA Smith for £6.75m, Cogent B2B acquiring St Ives Direct for £8m and Delta Labelling acquired by OpSec Security for £12.5m.

Digital and publishing make up the next largest sub sectors with notable deals including Stream Global, a US based company buying LBM for £29m from ISIS Equity Partners and the aforementioned Trader Media deal.

TV and music production comprise the smallest of the sub sectors in terms of volume of deals but the number is growing. In addition to Canal+ Groupe’s investment in Red Productions, Communis in Leeds acquired Jacaranda Productions in London for £1.5m to expand its offering to include video and film capabilities and earlier this year, ECI – a private equity investor with interest in tech companies- acquired Imagesound of Chesterfield, a provider of corporate messaging and brand support for £10m.

Other significant deals which have taken place since 2011 include Global Eagle Entertainment Inc. acquiring Travel Entertainment Group, an inflight media business for £22m, Piksel acquiring ioko365, a designer of digital media platforms for £50m, three Fishawack acquisitions and the PE company LDC paying £12m for a stake in the live communications company WRG.

But although the sector – and the entrepreneurs running these companies – is buzzing with anticipation of growth and realising their assets, the overwhelming majority of these companies are unlikely to sell and enjoy the fruits of their hard work and endeavour.

Neil McKay, whose CV includes three start-ups and three sales, is in the early stages of his fourth start-up, Endless Gain. The unusual thing about this vehicle though is that this time he doesn’t have a buyer for the business in mind from the outset.

“I did for my previous business, Lakestar Media (sold to McCann Worldwide for an undisclosed figure believed to be between £10m to £15m). In fact, I knew in advance who I wanted to sell to so I made sure everything was in place to attract the right buyers and enable the sale of the company.

Endless Gain's Neil McKay

Endless Gain’s Neil McKay

“We were in a maturing market and so we created a time-critical exit plan. I tracked the historical multiples from previous deals (including the earlier sale of another of McKay’s companies Global Media to The Carlyle Group) and forecasted what they would be within the next four to five years.

“That provided the EBITDA (earnings before interest, tax, depreciation and amortisation) target we needed to get the price I wanted for the business. And, that enabled me to plan and set time sensitive goals to keep us on track and not miss the window of opportunity. It worked well. We received four offers, and we sold to whom we originally identified as a potential buyer.

“My newco Endless Gain is very different. Conversion optimisation (in the digital sector) has been around for around 15 to 20 years, but it has only over the last 18 months or so attracted the interest of businesses in general. So as a sector, conversion optimisation is in the very early introductory phase of its life cycle, therefore, the opportunities are ‘endless’.

“The market will mature quickly through the advancement of technology and algorithms, however, there is no pressure to grow to sell the business. We not only increase revenues and profits for our clients but we also aim to change the actual business models of the companies we work with.

“So this time, I am just at the beginning of this optimisation journey and our opportunity today is more than ever global. And that’s why I haven’t planned an exit strategy.

“The CEO of a global corporate finance company recently told me: ‘You are reinvigorating a mature market [digital] and that is very exciting.'”

See our full M&A series:

M&A Week Day 1: Northern creative companies acquired between 2010 and 2016
M&A Week Day 2: Northern creative companies acquired between 2010 and 2016 (part 2)
M&A Week Day 3: The Northern acquirers buying companies based elsewhere
M&A Week Day 4: Northern targets for Private Equity and VC deals
M&A Week Day 5: Mergers and acquisitions in the creative industries: a concluding perspective