MSQ’s buyout shows the power of proper integration, investment and leadership. Barry Dudley quoted in The Drum

13th June 2023

US private equity firm has purchased a majority stake in UK digital ad agency group MSQ, promising further deals.

MSQ, the parent company behind design agency Elmwood, and B2B shop SteinIAS, has been acquired by an American private equity firm, One Equity Partners.

The group has expanded rapidly in recent years following a cash investment by private equity firm LDC in 2019, when the company was valued at £37.5m. In contrast, The Sunday Times estimates that One Equity acquired its majority stake for £170m.

After a series of acquisitions – including Elmwood, Be Heard and Brave Spark – MSQ’s annual revenues rose to £125m, with an EBITDA (earnings before interest, tax, depreciation and amortisation) of around £20m, representing a fourfold expansion.

Peter Reid, chief executive officer of MSQ, said that the deal would allow it to grow even further. “It’s been a highly successful four years at MSQ and there is huge potential and ambition to do more to build on our capabilities and footprint to enhance existing client relationships, attract new business and retain, develop and grow our team.

“The structure of the deal and the players involved will give us access to greater resources to extend our global offering, invest in talent, technology and services and position ourselves as the leading next-generation partner for the world’s leading and most ambitious brands through the continued successful integration of insight, data, technology and creative.”

Further deals expected

In recent years, the company has focused on expansion into the US market. A company spokesperson signaled further M&A activity could follow shortly, saying that “a number of potential add-on acquisitions have already been identified and are under evaluation.”

Barry Dudley, partner at M&A advisory Green Square, told The Drum: ”This is a great story showing how private equity can help accelerate a business forward and what feels very compelling here is that the growth has come organically as well as through acquisition.

”Just buying things will clearly make a group bigger, but it’s how you integrate these businesses, invest in them, lead and manage them, that will take performance to another level. It looks like Peter and his team have done a great job. To date, they have bought cleverly and arguably in a relatively below-the-radar way. With One Equity Partners now in the mix with their Madison Avenue head office, the focus is shifting to the US and also to Europe where they have offices in Germany and the Netherlands.”

He added: ”My money is on a statement acquisition, something high profile, being high on their target list.”

New backer

Founded in the US, One Equity Partners previously served as the merchant banking arm of American banking giant JPMorgan Chase (in 2014, JP Morgan sold half its stake in the business). Dr Jörg Zirener, senior managing director of One Equity, said: “MSQ’s business model and strategy provide a fantastic platform for future growth and we look forward to working with the excellent team there in accelerating the vision of creating a leading international digital, tech and creative group.

“With our experience and successful track record in buy-and-build transactions as well as our international set-up, we feel that we are well positioned to help the management of MSQ to develop the company into one of the leading global digital agencies.”

MSQ’s earlier private equity backers, LDC, retain a minority stake in the company. John Clarke, investment director at LDC, said: “MSQ is a phenomenal business and it’s been great to work alongside [Reid] and his team as they’ve built one of the most dynamic international groups in the market. There is still so much more to come for MSQ and our ongoing investment is testament to that and the quality of the team onboard.”

MSQ was first established in 2011 and has a global workforce of 1,200.