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Campaign UK

by Gideon Spanier

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Beth Sidhu

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The co-founders of Goodstuff Communications have sold their independent media agency to Stagwell, the US-listed “challenger” holding company.

Andrew Stephens and Ben Hayes, who set up Goodstuff in London in 2004, told Campaign the deal would enable them to add digital, data and technology capabilities and grow the agency’s business in the UK, as part of their strategic ambition to take their company from “Good to Great”.

Goodstuff – the UK’s second-biggest independent media agency and the 14th largest overall, with an estimated £208m in annual billings in 2020, according to Campaign’s School Reports – will retain its brand.

Stephens and Hayes have also committed to the company for five years as part of their earn-out.

The deal was agreed just days before Christmas. Financial terms were not disclosed but Goodstuff is likely to have sold for more than £30m on the basis that it reported profit before exceptional items, known as Ebitda, of £3.4m in the year before the pandemic, and typically an agency will sell for about 10 times annual profits.

Companies House filings show Stephens and Hayes controlled all the shares of Goodstuff Holdings but it is thought their combined stake ended up being closer to 75%, because eight other senior executives had share options that vest following the sale.

The eight partners are Simeon Adams, Bobby Din, Sam Drake, Paul Gayfer, Laura Moorcraft, Megan Stuart, Genevieve Tompkins and Simon Wilden.

Goodstuff employs about 130 people and has created a deal bonus pot to reward other staff with proceeds from the sale.

The agency will become part of Stagwell Media Network, the media arm, which has 3,000 staff and claims to manage close to $5bn (£3.7bn) in annual spend globally.

Mark Penn, a former Microsoft and WPP executive, founded Stagwell in 2015. It has since acquired dozens of agencies, including MDC Partners, the owner of creative shops 72andSunny and Anomaly and media agency Assembly. Stagwell has about 10,000 employees around the world.

Stephens and Hayes said: “Goodstuff’s unswerving mission is to be the world’s most inventive media agency, and to help accelerate our next phase, we wanted to join a network that could bring world-class capabilities in data, technology, and digital.

“In Stagwell, we’ve not only found these services, but also a partner that perfectly aligns with our culture of entrepreneurialism, invention, and progress. We’ve been hugely impressed by Stagwell’s challenger status and ambitions, their senior leadership team, and the breadth of world-class modern marketing brands in the group.”

Penn, who is chairman and chief executive of Stagwell, said: “We welcome Goodstuff as a critical part of our strategy to create a truly global and competitive media operation.

“When we created Stagwell Media Network [in September 2021], we set out to build a collaborative and coherent network of global media agencies that are on the leading edge of media, data, and technology. The addition of Goodstuff, with their unrivalled track record of innovation, continues to deliver on our vision of transforming marketing.”

It is understood that Goodstuff and Assembly worked together on pitching for at least one – unnamed – client last year, which encouraged both sides to consider an M&A deal.

James Townsend, global chief executive of Stagwell Media Network, said: “What attracted us to the agency were their world-class leadership and unwavering focus on people, culture, and the work.

“After a series of successful collaborations with Assembly in the UK, we see the potential for our network to build something truly differentiated, progressive, and exciting in the marketplace.”

Sale reflects Goodstuff’s need for digital, data and tech capabilities

Stephens, who is 50, and Hayes, 54, met in their twenties at Saatchi & Saatchi, before moving to Manning Gottlieb OMD, where they incubated Goodstuff – initially as a planning agency, before expanding into buying in 2011.

Omnicom, the parent company of Manning Gottlieb OMD, retained a minority stake until 2017, when Stephens and Hayes took 100% control.

The agency has won a reputation for its creative and collaborative approach, attracting clients such as Cazoo, OvoOn the Beach and Yorkshire Tea, winning Grands Prix at both the Media Week Awards and Campaign Media Awards in 2019 and 2020, and staging the annual Goodstuff Media Showcase, where media owners are invited to pitch ideas to creative agencies.

The founding partners have prided themselves on Goodstuff’s independent ownership, but there was speculation that they were considering a sale in autumn 2019 and the rumours resurfaced in the same period of 2021.

Their decision to sell now appears to be significant as clients increasingly look for one agency partner that can offer full-funnel, omnichannel planning and buying across both digital and traditional media.

Goodstuff is known for its expertise in communications planning and broadcast TV, whereas Stagwell’s media capabilities are chiefly in digital and performance marketing. Stagwell acquired specialists such as Forward3D and PMX and subsequently merged them with Assembly, a traditional media agency.

Stephens and Hayes explained the rationale for the sale in a company blog post, describing it as “a recognition that whilst we’re one of the UK’s leading media agencies now, the digital, data and technology industry around us is changing at such pace that, if we’re to realise our stated mission [to move from ‘Good to Great’], we must similarly change, and evolve our offering”.

Goodstuff initially talked to several “digital specialists” about the idea of an “informal” partnership, before moving to discussions about a sale, according to the blogpost.

Stephens added they were certain that they did not want to sell to one of the established agency giants or a private equity investor because that would not help Goodstuff to achieve its ambitions.

Headroom for growth in the UK 

Goodstuff Communications is Stagwell’s first acquisition since the merger of MDC Partners completed in August 2021 through a reverse takeover. The company is listed on the New York stock market.

Penn has talked about building Stagwell into “a digital-first alternative to traditional agency holding companies”. It is one of several “challenger” groups – including S4 Capital, You & Mr Jones and Dept – to have emerged in recent years.

He told investors at Stagwell’s Q3 results that “making sure that we have on[line] and offline media on a global basis” and winning “global contracts” were among his priorities.

Acquiring Goodstuff allows Stagwell to bring together offline and online media in Europe in the same way that it has already done in the US, Townsend told Campaign, stressing the growing need to combine brand building and performance marketing in a single offer that he called “brand performance”.

Stagwell Media Network will have nearly 500 staff in Europe. Assembly employs about 350 people, plus 130 are joining from Goodstuff.

While Goodstuff is expected to support Stagwell Media Network on work across Europe, Stephens and Hayes said their primary focus remains the UK.

There is headroom for growth as they look to compete with bigger rivals, they said, citing Publicis Groupe’s Zenith, WPP’s Essence and Manning Gottlieb OMD as examples of some of the UK’s top 10 media agencies that they rate.

Goodstuff was advised by corporate advisory firm Clarity, law firm Osborne Clarke and accountants Moore Kingston Smith.

Clarity previously worked on Adam & Eve’s sale to Omnicom’s DDB and M&C Saatchi’s sale of Walker Media to Publicis Groupe. Walker Media had a similar profile to Goodstuff and sold at a multiple of 9.2 times annual profits.

Stephens and Hayes stressed in their blog post that “all the good bits of Goodstuff remain unchanged” following the sale.

The post said: “Andrew, Ben and the partners are committed for the long term… our brand, our values, our culture and our relentless focus on inventive work will not shift an inch but as of today, we also have access to world-class digital and data talent, services and technology to bring omnichannel brilliance to the most progressive client brands.”

As part of the sale process, Goodstuff has exited its minority interests in Love Sugar Science and Sixteen By Nine, two agencies that it supported in a start-up initiative, called Startstuff, in 2019.

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