Friday, May 24, 2019

Droga5's implied price tag? $475M | Advertising Age

When Accenture Interactive announced its deal to buy creative powerhouse Droga5 last month, the price tag remained a question mark. We now have a likely answer: about $475 million.

That valuation can be inferred from the May 23 filing for an initial public offering by Endeavor Group Holdings, whose talent agency, William Morris Endeavor, bought a 49 percent stake in Droga5 in 2013.

The IPO filing revealed: “On March 29, 2019, our subsidiary, WME Dragon Holdings, LLC, entered into a definitive agreement to sell its 49% interest in Droga5 to an affiliate of Accenture LLP for consideration of $233.0 million, subject to customary adjustments.”

That implies a valuation for David Droga’s ad agency of $475.5 million, subject to, well, customary adjustments.

That in turn suggests a payout of about $242.5 million for the agency’s 51 percent owner, which is identified in the Endeavor filing as “David5, LLC.”

Accenture Interactive did not disclose financial terms in announcing the deal April 3. But a spokesman confirmed at the time it was the largest agency acquisition made by Accenture when measured by price, revenue and headcount.

Endeavor’s filing includes detailed financial statements for Droga5. The agency’s “revenues, net of reimbursable costs” fell to $169.8 million in 2018 from $195.6 million in 2017. Net income dropped to $29.9 million in 2018 from $53 million in 2017.

The financial statements show that one undisclosed client last year accounted for 21 percent of Droga5’s revenue.

In its submission late last year for Agency A-List 2019, Droga5 reported its top three clients, "in no particular order," as Google, Chase and Sprint. Droga5 also told Ad Age that last year was its first-ever year of revenue decline. (Ad Age named Droga5 as the Agency A-List's Agency Innovator of the Year.)

Endeavor said it completed the sale of its Droga5 stake on April 30. While the agreed upon price for its stake was "approximately $233 million, subject to customary adjustments such as working capital adjustments," Endeavor at closing received $206.8 million, “which amount is subject to customary (but upward only) post-closing adjustments, including for the release of escrows.”

Accenture Interactive announced the deal's closing on May 1. In that announcement, Accenture Interactive said: "Financial terms of the transaction were not disclosed."

Efforts to reach an Accenture Interactive representative for comment before publication today were not successful. A Droga5 spokeswoman declined to comment.
Droga5, which added more than 500 employees to Accenture Interactive, is a high-profile acquisition for the consultancy but will be a comparatively small part of Accenture’s portfolio. 

Accenture Interactive reported 2018 worldwide revenue of $8.5 billion, according to Ad Age Datacenter. New York-based Accenture Interactive is a fast-growing branch of global consulting giant Accenture. Dublin-based Accenture reported worldwide net revenue of $39.6 billion in the fiscal year ended August 2018, when it employed 459,000 people.

Droga5 will keep its agency name at Accenture Interactive, and the management team will remain intact, with Droga continuing as creative chairman.

Endeavor’s 378-page IPO filing, of course, also has much to say about the uber talent agency and its various endeavors, which include ownership of IMG Worldwide Holdings (media, sports, modeling), Ultimate Fighting Championship (mixed martial arts) and Miss Universe.

The company’s revenue last year jumped 19.6 percent to $3.6 billion. Endeavor reported a net loss each year from 2014 through 2017, but it moved into the black in 2018 with net income of $231.3 million.

Contributing: Ann-Christine Diaz


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