Kantar and Bain on their $4bn deal: Now we can invest and acquire more

Kantar’s new majority owner has promised to invest and make acquisitions following its deal to buy 60% of the research business from WPP.

Eric Salama, chief executive of Kantar, who is staying at the business, said the new owner, private-equity firm Bain Capital, will be able to invest more in technology, people and acquisitions than if WPP kept 100% of the company.

Luca Bassi, a managing director at Bain, said there are growth opportunities in market research, despite revenues in WPP’s data investment arm, which includes Kantar, lagging the wider group for much of the past decade.

There has been speculation since April 2018 that Kantar, which employs 28,000 globally, was up for sale. The deal ends the uncertainty, although Salama said Kantar has been running normally and "we haven’t been in limbo".

Salama and Bassi spoke to Campaign alongside Mark Read, chief executive of WPP, after the transaction, which values Kantar at £3.2bn or about $4bn.

Bassi said: "We see more and more companies and corporates of any sort of size, industry and geography increasingly require more data and better solutions to analyse them."

These clients "are willing to spend more" on such services so that they can "make better decisions", according to Bassi, who stressed that "we don’t see at all" any sign of "structural decline" in the sector.

Rather, "the issue is industry structural change", he added: "Customers have wanted information and data that are faster, more digitalised, more accurate, more sophisticated, more valued-added – and, frankly, also cheaper."

Bassi said Bain’s investment thesis is to "leverage" Kantar’s "brand", "reputation" and "impressive customer roster" to invest in digital solutions and grow.

He expects Bain to make "a mix of internal technological investment, people investment to bring on board stronger people capabilities and also external investment, because we have seen there are a lot of small companies – technology disruptors – in the market [that Kantar could buy]."

WPP said it would receive £2.5bn for its 60% stake after accouting adjustments, with £1bn set to be returned to shareholders and £1.5bn used to pay off loans – a priority for the company, which has said previously that it needs to bring its debt "under control".

Kantar’s expansion plan

Salama said Kantar can be more acquisitive in areas such as "analytics and ecommerce and behavioural data" with Bain’s support.

Kantar would be more constrained and have only about £30m a year for mergers and acquisitions, "which doesn’t buy you very much" if the company remained wholly owned by WPP, he explained.

The team has spent the past six months working on a business plan, including scaling some of Kantar’s new products and services such as analytics, which has been growing at a "double-digit" rate, and trade promotion optimisation.

Salama also wants to invest in technology, IT and engineering to improve other areas such as self-service tools.

Asked about Kantar’s competitor set, Salama said there is not one direct rival, but named many companies that operate in some similar areas.

These include Accenture for trade promotion optimisation, Nielsen and a new wave of technology start-ups for media measurement and Ipsos for consulting.

Since "the market is growing", Salama is more concerned with improving Kantar’s offer than what its competitors are doing.

"What we need to do is be relevant and contemporary, and offer impact and value for our clients," he said. "The real competition is not another company."

Other large agency groups have been buying data companies, notably Publicis Groupe, which has acquired Epsilon, and Interpublic, which bought Acxiom, but Read said Kantar is "a different business".

He is more interested in "data usage" rather than "data ownership", adding that data "is not a goal in and of itself".

WPP will still have a lot of data because of its media and creative agency operations, and it will retain access to Kantar, Read pointed out, adding that the auction of Kantar had been "very competitive".

Analysts at Citigroup and Liberum have said WPP should be able to grow faster without Kantar and it could help Read reach his target of organic growth in line with peers by 2021.

Aegis also improved its valuation after it sold research arm Synovate to Ipsos in 2011 and Dentsu went on to buy Aegis a year later.