Independent agency group Engine is in talks to sell its UK operations to Next Fifteen Communications, the parent company of agencies such as Elvis, Archetype and Brandwidth.
Engine’s owner Lake Capital has been attempting to break up and sell the group since May 2021. Sky News reported last year that it had contracted investment bank Lazard to run an auction.
Last night Sky’s business editor Mark Kleinman reported that Next Fifteen had emerged as a buyer.
Revealed: Next Fifteen Communications, the digital marketing agency group, is in advanced talks to acquire the British operations of rival Engine Group. Sources say that Next Fifteen, which has a market value of over £1bn, plans to partly fund the deal by selling new shares.
— Mark Kleinman (@MarkKleinmanSky) February 20, 2022
Though Engine has not yet released a statement, a spokesperson for Next Fifteen said that the company ”notes the recent press speculation in relation to the potential acquisition of Engine UK.
”In line with its strategy, the company regularly assesses a number of potential acquisition opportunities at any given time. The company confirms that it is in discussions with Engine UK and its owners. Shareholders are advised that there can be no certainty that any transaction will proceed to completion or as to how any transaction would be structured.”
Engine hosts a range of blue-chip clients, including baker Warburtons, Red Bull and Sky, as well as the Royal Navy.
The business’s structure, with different divisions handling comms, creative and digital transformation services, means further break-ups of its US and Asia Pacific operations are possible.
Though negotiations regarding the American business are reportedly ongoing, if Lake holds on to Engine’s international operations for later sale or integration into its other businesses, Next Fifteen may not maintain the Engine agency brand.
Writing in The Drum upon the announcement of Lake’s auction process, SI Partners’ Tristan Rice warned: ”If they are sold to three different buyers, the Engine brand will have to be dropped by at least two of them, which carries some risk that might impact value. Value could also be eroded through the loss of clients that prefer the current, integrated model.”
Lake’s asking price for Engine was reported previously to be around £100m – an amount that AIM-listed Next Fifteen hopes to meet by selling shares.