SI Global Partner, Jack Mehigan explains how M&A appetite for creative agencies is returning, particularly for businesses combining high-quality creative work with social, influencer, content and creator-led distribution.
--
Until recently, it seemed M&A demand for creative agencies had dried up. The boom days of the likes of WPP & Omnicom snapping up marquee agencies to add headcount and EBITDA appeared long gone – the new era of agency M&A centred mainly around performance and digital.
However over the past few years, we have seen a switch in acquirer demand, once again seeking best-in-class creative studios – such as Globant buying GUT and Koto taking investment from Westbridge. Agencies with a track record of crafting creative assets for blue-chip clients that need to build and maintain their brands in an ever-changing marketplace.
McKinsey reported recently that “CMOs’ top marketing priority for 2026 was ‘Brand’”, and it is very hard to maintain a prominent brand without strong creative assets – whether through paid or earned media channels. In a world of short attention spans where it is becoming easier to produce at speed & scale, what’s most important is that the creative is exceptional.
No prizes for saying this is largely due to AI. It is making content much easier to produce and faster to proliferate so, the quality of the content comes into sharper focus.
Content produced solely by AI, for now anyway, is average-at-best and consumers can spot it a mile off. Accordingly, brands are hyper-sensitive about being caught out using ‘AI Slop’, so they seek out the top-notch agencies that can produce authentic, culturally-relevant creative assets to drive attention and engagement.
A leading industry CEO recently noted that “AI raises the floor and creativity raises the ceiling” and this is exactly what we're seeing. The lowest quality assets are better, but without human creativity, the very best can’t be attained solely using LLMs.
For agencies, it is already ‘table stakes’ to use AI for back-end efficiency gains and indeed even for some ‘front-end’ tasks like ideation or even prototyping. But if an LLM is your entire creative department, you’ll be in trouble.
Per our latest Private Equity report, investors think similarly, they seek management teams that understand how to embed AI into a credible value creation plan. They expect cost reductions from AI without impact on revenue. This is best achieved by charging on an outcome-based model rather than the classic time & materials basis.
Once the best creative is produced though, it needs to be distributed effectively.
These days, a lot of eyeballs live on the social media ‘walled gardens’ instead of websites (or TVs). Coupled with AI, this is leading to a slow death for pay-per-click and indeed SEO as we know it.
Enter influencer marketing, social, content and creator economy agencies, who in their different ways all contribute to the new waves of distributing creative assets. So, unsurprisingly we are seeing a wealth of M&A interest in these areas too – look at deals like Samy’s purchase of Content Lab, Residence’s activity and moves from some of the ‘majors’: Publicis (Fabric) & Accenture (Whalar).
We're going to see more acquisitions of the best-in-class agencies that operate across creative, influencer marketing, earned social and content.
We're going to see a lot of agencies come to market and fail to sell because they cannot demonstrate how they are best-in-class. By definition, not every business is.
We’ve already seen an overreaction from investors against certain areas of marketing services like digital production, so we expect a regression to the norm here too. The AI fears of early 2026 are likely to normalise somewhat.
Finally, we are already seeing savvy investors spot that a lot of those risks are mitigated by investing in physical world disciplines like shopper marketing, retail, packaging design, production & fabrication and events & experiential.
Marrying up these varying themes of creative, social and how that dovetails with the physical world, we should see a lot more acquisition activity in the coming months.
Long may the deals flow.