| posted by

Why has Publicis bought another full-service agency?

Publicis’ acquisition of Rauxa just one month after its eye-watering purchase of Epsilon may strike many as surprising, and some as imprudent. But the deal has been a long time coming, and is based much more in performance strategy than creative firepower.  

Publicis Groupe has today (19 August) acquired Rauxa, a formerly independent full-service marketing agency that will now sit within Publicis Media. Founded in 1999 by Jill Gwaltney, the agency brand boasts of being the industry’s largest woman-owned agency with a net revenue of $70m in 2018, according to the holding company’s acquisition announcement.

The deal has been made public just six weeks after Arthur Sadoun’s group purchased the data business Epsilon in an eyebrow-raising $4bn deal. Financial details of today’s buyout, which comprises 300 Rauxa employees, six offices and roughly 25 new clients, were not disclosed.

The news comes at a time of a creative kerfuffle at the group.

The triumphant return to Cannes Lions after a controversial fallow year was damped somewhat by a 50% cut to entries compared to 2017; Omnicom and IPG went on to claim the biggest awards. Then one week later, Nick Law, the group chief creative officer Sadoun had spent months courting, announced he was bouncing in-house to Apple after just 18 months in the job.

The pricey Epsilon deal, which Sadoun was forced to defend during the Q2 investor call in July, also saw the absorption of the Epsilon Creative Agency. Meanwhile Publicis’ bespoke AI platform, Marcel, is still yet to pay its promised collaborative dividends across the business – more than two years since it was announced.

So, in a year of big spending, relatively low growth and creative flux, why is Publicis buying the 20-year-old, full-service Rauxa now, given it already has a stable of such integrated agency brands under its roof?

The official party line is “Publicis Groupe is reinforcing its expertise in driving one-to-one consumer engagement for clients, through data-driven creativity offerings and scaled capabilities”. That’s according to Sadoun who, in a statement, added Rauxa was brought into the fold for its experience in “data, tech, media, creative and production”.

Publicis declined to comment further on the matter, and Rauxa did not respond to requests for comment. However, The Drum understands the deal has been inevitable for quite some time.

The two companies had worked together on clients such as Verizon and Samsung, two of Rauxa’s biggest accounts, for a number of years. The indie’s top execs and staff are “well known” among Publicis leadership, according to someone familiar with the matter.

But ultimately, it was the agency’s capabilities in performance marketing that officially caught the eye of Publicis’ M&A department late last year.

“I don’t really see this as a ‘full-service agency’ deal, despite how it’s been described in the press release,” said Julie Langley, partner at Results International. “Rauxa’s heritage seems firmly rooted in the world of CRM and data. Publicis highlights Rauxa’s ability to boost their ‘CRM and personalized creative offerings’, and I suspect that’s the capability driving the deal.”

It’s this focus that led Publicis to nestle Rauxa among media shops such as Digitas and Moxie, rather than its creative comms giants such as Saatchi & Saatchi and Leo Burnett.

Despite selling itself as a full-service shop, Gwaltney noted in a statement that she launched Rauxa 20 years ago to provide clients with “an agency focused on doing the very best job of one-to-one marketing” – and will now continue to do so with the stronger backing of the Publicis network and Epsilon data.

Meanwhile, Publicis now has a chance to plug some of its diminishing North American ad spend by upselling to Rauxa’s clients. The acquisition will see currently small but potentially lucrative accounts such as Alaska Airlines and Vans pulled into Publicis’ orbit, no doubt held up as targets for the company’s ‘Power of One’ model.

It will also strengthen Publicis’ offer when coming up against the likes of WPP’s Essence and Accenture-owned agencies at pitch, particurly when clients are dangling CRM, personalized creative and digital transformation across the table.

Additionally, the deal will likely please staff at Rauxa: Glassdoor and Fishbowl reviews continually feature complaints about long hours and hard labor on the Verizon account in particular.

With the support of Moxie, MRY and Digitas – and the possibilities of working with additional clients – Rauxa may find it easier to claim and retain strong talent in the US, as well as lure over staff from other markets not currently aware of its staunchly American brand.

Featured by The Drum

1