M&C Saatchi Mobile Earn-Out Completed
London, 5th May 2015: The Vendor of Inside Mobile, now re-named M&C Saatchi Mobile, has completed the sale of the business to M&C Saatchi PLC with the sale of the final 10% holding for 1,019,267 shares in M&C Saatchi PLC (current price £3.26) which were subsequently placed in the market with institutional investors. This follows the purchase of a 20% holding in M&C Saatchi Mobile for 2,030,131 shares on 2nd May 2014 (prevailing price: £2.90).
These transactions complete a highly successful sale process which started with the original sale of 60% of Inside Mobile in June 2010 for £2m, advised by D5 Capital. At the time of the deal, the Vendors clearly saw that their market was shifting from corporate ‘app development’ towards mobile advertising, but that a major international partner was needed to support the internationalisation of the business in order to secure a leading position in that market. Management believed that M&C Saatchi PLC had the right reach, brand and culture to support the growth plan and worked with D5 Capital to structure an earn-out that would reward that partnership.
The transaction was modified in 2013 to accommodate the early retirement of one of the Vendors and to provide added incentive for the management to grow the business across the M&C Saatchi network. A novel profit participation model was also created to reward both the local offices and the M&C Saatchi Mobile ‘hub’ for sharing the risk of this expansion. As a result, M&C Saatchi Mobile opened offices in Cape Town, Los Angeles, New York, San Francisco and Sydney during the earn-out period and grew profits of the core UK business to over £3m – an 8x increase of over the period compared to pre-acquisition profits.
Since the acquisition, M&C Saatchi Mobile has become an industry leader, winning Mobile Agency of the Year 2014 (The Drum Awards) and Best Agency for Mobile 2014 (iMedia Awards). In addition, the CEO of M&C Saatchi Mobile, James Hilton, came out top of The Drum’s Mobile Top 50 list in 2014.
Throughout the process, D5 Capital advised the Vendors on the best strategy for maximising returns for all stakeholders. The growth of the mobile business has been instrumental in helping M&C Saatchi’s share price rise from 90p in mid-2010 to an all-time high of £3.94 in March 2015. At each stage of the sale process, the lead Director on the mandate, Rupert Ashe, was involved in detailed negotiations and analysis of the deal to ensure that minority interests were protected without getting in the way of the ‘big picture’ growth story for the owner.
Commenting on the sale and earn-out process, James Hilton (CEO and co-Founder) said:
“I genuinely feel that the sale and integration of Inside Mobile into M&C Saatchi could not have been more successful. It has involved a lot of hard work, but the outcome has been spectacular for all parties. D5 Capital have been ‘right there’ throughout the process, making sure that we got the best outcome. A lot of M&A advisers disappear while the Sale & Purchase Agreement signatures are still wet on the page. But D5 Capital have been constantly involved, helping with the re-negotiation of the deal, right through to the earn-out payments and the placing of the shares in the market. It has been an exhilarating and rewarding process and I couldn’t have done it without their support.”
Commenting on the sale, Rupert Ashe, CEO of D5 Capital said:
“The Inside Mobile deal shows what can be done with a well-structured and carefully managed deal and an ambitious buyer. If the incentives and the scaling strategy are right, you can turn a fledgling business into a market leader over the course of a 4-year earn-out. The result is financial freedom for the vendors and a superb growth story for the PLC. I congratulate everyone for their part in a really successful deal which we are proud to have advised along the way.”
