It’s Official: S4 Grabs MightyHive For $150 Million

After weeks of speculation, S4 Capital said Tuesday it will merge with programmatic agency MightyHive.

S4, launched by former WPP CEO Martin Sorrell, will pay $150 million for MightyHive. The agency’s revenues grew 129% at a compound annual growth rate between 2015 and 2017. Revenues for the first nine months of 2018 were $40.7 million, according to a regulatory filing with the UK stock exchange.

Founded by former Google executive Pete Kim, MightyHive is a consultancy with Google expertise, is focused on programmatic buying and often helps clients bring programmatic capabilities in-house. Its clients include Nationwide, Sprint and Bayer. Kim and MightyHive COO Christopher Martin will join S4’s board of directors.

MightyHive furthers S4’s goal to align creative, digital media and first-party data capabilities, the company said in the filing.

“Brands are increasingly considering moving away from traditional agency relationships,” the filing reads. “The Directors and the Proposed Directors believe the shift to decoupling and in-housing may be driven, in part, by a lack of transparency in the legacy agency model.”

S4 will combine MightyHive’s programmatic chops with the digital production prowess of MediaMonks, its first agency acquisition back in April, for which it paid more than twice as much: $350 million.

“MediaMonks creates [content] and MightyHive distributes it in the most effective and efficient way,” Sorrell told AdExchanger.

Sorrell also said San Francisco-based MightyHive’s relationships with other Bay Area technology giants such as Facebook and Google “will intensify” under its ownership.

“There’s a very strong tech bias at both [MightyHive and MediaMonks],” he said. “We’re a purely digital company. A lot of those [tech giants] are on the West Coast, so we’re building expertise in that area.”

For MightyHive’s existing clients, it’s business as usual, the company said in a blog post, although the agency will work closely with MediaMonks and S4-owned agencies on cross-discipline services in the future.

“As advertising, content and commerce continue to converge and data plays a central role, our clients will be able to do more through an integrated offering created by the companies that are a part of S4 Capital,” MightyHive said in the blog post.

MightyHive will also continue to help clients bring programmatic in-house under S4 as they increasingly seek more control over their media investments.

“There are challenges around [in-housing], mainly in the areas of talent and technology, but MightyHive is very well versed in addressing those issues,” Sorrell said. “They’re very flexible in determining the model.”

S4 has previously said it wants to deliver “better, faster and cheaper” services than traditional holding companies, which are often criticized for being unwieldy and slow moving. To incentivize collaboration between its agencies, S4 will organize on a unitary basis with key leaders incentivized by the performance of the group through equity ownership.

“The peanut has now morphed into a coconut, and is growing and ripening,” Sorrell said of S4, expanding on his favorite metaphor for his new company.

S4 expects the merger to be “significantly accretive to earnings per share” within a year of completing the deal.

While S4 plans to make further acquisitions down the line, Sorrell wants to focus on organic growth and deepening and broadening its client list.

“We don’t have the complete trainer set yet but we have three-quarters to seven-eighths of it,” he said.

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