Next 15 eyes international expansion for Engine Group

Next 15 Communications Group is planning on making more deals following its purchase of Engine Group UK, according to chief executive officer Tim Dyson.

It was announced last week that Next 15 was set to buy Engine Group UK, including ad agency Engine Creative, from its private equity owners, Lake Capital, for £77.5m.

Dyson told Campaign that the business, which also owns agencies ODD and Elvis, will be looking to grow its creative division, adding: “It would be strange if we didn’t do more from an acquisition perspective in this area, it’s not an area where we have scale compared to other parts of the business.

“Our revenue will be around £500m next year, out of that the advertising revenue is probably less than 10%, which is way too small. That needs to be nearer 20-25%.”

Next 15 plans to expand Engine Group UK internationally. The company, which is headquartered in London but cites the US as its main country of operation, also has a footprint across Europe and Asia.

“Having just a UK entity doesn’t fit our model, we want to develop into other markets,” Dyson explained.

Following the deal, Engine Creative will merge with ODD under the leadership of ODD group chief executive officer Phil Fearnley. 

Dyson stated that ODD, which is focused on the fashion industry and is a smaller agency than Engine Creative, had “big ambitions” to do more and that the integration would accelerate its growth.

“Once we learned that Ete [Davies] was going to be leaving it made sense for us to integrate the two businesses,” he added.

It was announced in January this year that Engine Creative chief executive officer Ete Davies was leaving the agency after two and a half years.

According to Dyson, while new boss Fearnley does not have any experience in leading an ad agency, he “comes from a background of business integration work”. 

He continued: “He has a history of not stepping on the toes of creatives in that process and giving them room to be brilliant at what they’re brilliant at. 

“He also knows that what we're trying to build is a set of businesses that all have tech and data embedded into them.”

Dyson stressed that ODD is not “coming in and taking over” and promised that Engine Creative will “have a big voice” in where the company goes.

“Phil’s more of a coach-mentor-style leader than a ‘do it my way or the highway’ type leader,” he added.

The Engine Creative brand will be kept in the short-term, but Dyson stated that the plan is to create a new combined entity and that he “wouldn’t be surprised” if the name changes in the future. 

Meanwhile, he stated that there are currently no plans to merge Elvis with the other two agencies. 

“We have other plans for what we want to do with Elvis and they require quite significant investment from us,” he noted.

Next 15 has previously said that it expects the deal to deliver cost synergies of “at least” £3m by 31 January 2024.

Asked how this will be achieved, Dyson admitted that there was “some duplication” between Engine UK’s head office team and the Next 15 head office team.

He detailed: “Some of that team will go into the individual businesses, some will come into ours and some will unfortunately not have a role in the enlarged business.”

He stated that most of the cost-savings were “property-related” and estimated that 10 to 15 people were at risk of redundancy. Engine UK has a total of 600 staff.

Lake Capital initially put Engine Group UK, which is divided into three divisions – Engine Creative, Engine Transformation and Engine Communication, trading as MHP Mischief – up for sale last summer.

Dyson explained that Next 15 had initially only been interested in buying the transformation division, but after reviewing the other two businesses made the decision to bid on all three.

He said that the discussions with Lake went on for around three months and that the private equity business had been talking to a number of potential buyers for each of the individual divisions. 

However, none of the other parties wanted to buy all three divisions so Next 15 emerged as the winning bidder.

Dyson concluded: “In PE cash is king and separating all the systems in the three businesses would have made it more expensive for them. 

“It made more sense to sell to one buyer even though they got a slightly lower price than they could have got from individual transactions.”