Another bidder emerged from those initial conversations and subsequently secured exclusivity, and despite being close to transacting in May 2022, ultimately failed to deliver.
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DURING M&A BOOMS, deal processes can become commoditised and even more price driven than usual. But when the market slows, the importance of dealing with a counterparty with a reputation for integrity becomes critical for vendors and management teams.
This was the situation starting to emerge when out-of-home (OOH) advertising agency Talon came to market.
Globally, the OOH industry is worth around $32 billion and is growing strongly, even as spending on digital advertising has exploded and advertising in other “traditional” media has declined. OOH is one of the oldest forms of advertising and offers brands an unreplicable way of reaching many consumers through large physical displays across the built environment.
We were introduced to Talon in November 2021 by Simon Nicholls at GP Bullhound, who was acting as the sell-side adviser. We are active investors in the marketing & advertising services sector, having backed companies such as Inspired Thinking Group (Team ITG), adm Group and PIA, and Simon knew that the company would be of interest to our team.
We were impressed by the senior management team, in particular the founder, Eric Newnham, who is a genuine pioneer of the OOH segment. We were also attracted to the strength and depth of the wider management team, the fundamentals of the OOH market, and the business’s clear growth strategy, particularly its plans to continue expanding into the US.
As much as we liked the business and the management team, however, we decided not to proceed at that point. It was the end of 2021, the Omicron variation of COVID-19 had emerged, and we just couldn’t get comfortable with bidding given the ongoing risk of further lockdowns, at the same time as being faced with financial metrics that were disturbed by previous lockdowns.
A second look…
In turn, this created the opportunity for us to revisit the transaction alongside one other bidder. Given the early rapport we had struck with the management, they were eager for us to re-engage on the process and indicated we would be a “preferred” partner.
Paul Harper, the lead partner on the deal, and my fellow director Chris Candfield, had a strong relationship with Simon at GP Bullhound and that trust was a big factor in the call coming into Equistone, after the first bidder fell away.
The relationship with the existing owner, Mayfair Equity Partners, was also important – this extended to personal relationships that were built a number of years before when the respective partners sat together on the Board of the Compleat Food Group, a former Equistone portfolio company. Mayfair had been understandably frustrated by the delay to their original sale process and were eager to re-engage with a trusted party to deliver on a mutually agreeable price. It was the personal relationships that enabled an open dialogue to quickly establish the trust required.
Mayfair wanted the assurance that if we were given preferential access to get the deal done, we would not indulge in gamesmanship and price chipping at the end.
Acting with integrity might sound trite, but in the world of M&A, when there can be short-term rewards for being opaque, non-committal and sharp-elbowed, refusing to behave in that way requires a belief in a long-term strategy founded on being straightforward and transparent. Yes, sometimes that means you lose deals by not engaging in certain games, but it also means that when opportunities emerge outside of vanilla processes, you are seen as a reliable counterparty. This was the case with Talon.
The big picture
Despite being faced with a fresh set of geo-political uncertainties, by the time of our ‘second look’, the business had had a chance to trade through a period of some normality and report ‘clean’ non-adjusted EBITDA figures.
The main focus through our due diligence was to understand what Talon could become in five or six years, and whether its position was defensible. As an agency that secures OOH sites on behalf of brands, a key risk to assess was the threat of disintermediation. It became clear, however, that as OOH remains a very fragmented market, Talon was adding significant value.
The number of growth drivers for the business also excited us. Growth in the US and internationally offered significant upside, and the business was also leading the way in the digitalisation of OOH advertising. Digital screens are coming onto OOH displays and Talon is leading the way here, with a team of around 35 developers who are developing programmatic advertising technology.
When we assessed all of these elements in the round, it enabled us to get comfortable with the outlook and move forward and transact. Equistone acquired the business from Mayfair Equity Partners in July 2022.
Talking talent
Since our investment in Talon, the business has traded very well. In our due diligence, we considered the impact that inflation and interest rates could have on the business, and were anticipating a more muted first 12 months, but despite the macro headwinds Talon has faced, the business is outperforming budget and is also ahead of its investment case.
During our hold there have been two key focus areas for us: strengthening and deepening senior management and supporting acquisitions.
With respect to bringing in talent, business culture is top of the agenda in the media and advertising services sector.
It’s all about people
Eric Newnham has stayed with Talon, which has been fantastic for the business. He is a real ambassador for Talon and the OOH industry, and we wanted to bring in people to support him. We could have hired in people straight out of the OOH sector, but we wanted to build a team that had the skills and experience to drive Eric’s ambitions to build Talon into a digitised 21st century OOH agency.
The recruitment of Stewart Easterbrook as chairman was the first big appointment. Stewart joined us early in the journey and has been very impressive. He has been heavily involved in growing businesses in North America and bringing him in made a big strategic statement about our plans to take Talon global and intensify the focus on digital.
The next key appointment was Sue Frogley as group chief executive. As the former chief executive of the UK media arm at Publicis Groupe, which she built into a £2bn+ business, Sue has broader media services experience from running a full-service global agency.
Another key hire was Mike Saunter as chief financial officer. Mike was previously the European chief financial officer of ClearChannel, one of the biggest OOH media owners across Europe.
...times of volatility can provide attractive opportunities for us to deploy as we are comfortable taking longer-term views founded on robust diligence.
Supporting Talon’s acquisition strategy has been the other strand of the value creation plan for the business, and since our investment, Talon has acquired Evolve, a specialist international OOH business, and Novus Canada, an OOH media agency based in Canada.
We continue to work with Talon on other potential deals, with management leading the origination of M&A opportunities. They are so well networked globally and receive a steady flow of deal opportunities in off-market processes.
The strong performance and overall strategic progress Talon has delivered since our investment show that times of volatility can provide attractive opportunities for us to deploy as we are comfortable taking longer-term views founded on robust diligence and having a suitable capital structure in place.
We pride ourselves on being transparent and straightforward to deal with. At the top of the cycle, in hot deal markets, these qualities can get lost in the frenzy. In a market where everything isn’t straightforward, however, deliverability and relationships are attributes that really do matter. ☐
A full version of this article appeared in PLATFORM 11, Summer 2024