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Croud has sold a majority stake to UK private equity firm ECI for an undisclosed sum.
The sale marks a “new dawn” for the global full-service digital marketing company, Luke Smith, the global chief executive and co-founder, said.
Private equity investor LDC, part of Lloyds Banking Group, previously held a minority stake in the company bought for £30m in 2019. This has now been paid back and LDC has exited the business.
Since LDC’s investment, Croud has grown three-fold, with headcount rising from 185 to more than 600.
It has also acquired several businesses, including social media shop Born Social, analytics specialist Metageni and performance marketing company Verb Brands (now named Croud Luxe). In the US, Croud acquired digital marketing agency Vert Digital.
It is thought Croud could now be valued at upwards of £180m, given its likely £60m valuation in 2019, when it previously sold the minority stake for £30m, and its subsequent tripling in size.
Croud and ECI declined to comment on the value of deal, but said it was “significantly higher” than LDC’s stake.
For the period of 2022 to 2023, Croud had a declared income of £23.5m, according to its Campaign School Report.
US expansion plans
ECI was chosen for the deal after a competitive selection process, which considered a “wide” range of investors including large agency networks and private equity both in the UK and US.
With ECI, Croud plans to make further acquisitions to expand the agency’s marketing technologies and scale in the US over the next five years.
About 150 people, or a quarter of Croud’s 600-strong workforce, are based in the US, with about 450 in the UK and 10 in Dubai.
As part of the minority partnership with LDC five years ago, 160 out of Croud’s, then, 185 staff received cash windfalls depending on seniority and length of service. Around 15 senior figures received six-figure sums.
As many of Croud’s staff are shareholders in the business, Smith confirmed that a “significant number of people will be getting a return on their investment into the business over the coming 12 to 18 months”.
In addition, Croud received £34m in bank loans earlier this year to support its merger and acquisitions strategy, which has now also been paid off.
Smith said the bank’s funding was about “getting a war chest for M&A, and we’ve now a bigger war chest”.
While he and Ben Knight, his co-founder, launched the agency in 2011, “it feels like we’re just getting started” and that “all the building blocks are in place for a potential even more succesful next five years”, according to Smith.
Rory Nath, investment director at ECI, said that Croud’s acquisition strategy, its freelancer model, called the Croudie Network, and investment in tech and AI were “the best [they’ve] seen”, demonstrated by the agency’s commitment to talent and recognition in Campaign’s Best Places to Work lists.
The Croudie Network is a global, fractional workforce that works 20% to 40% of Croud’s billable client hours, providing specialist skills and expertise, and Croudies are based in remote locations, rather than in the office.
Deal exchanged ahead of Rachel Reeves’ Budget
It is understood the deal exchanged this month, ahead of the new UK government’s Budget yesterday (30 October), when the Chancellor Rachel Reeves confirmed increases in capital gains tax and employer national insurance contributions. The deal is “pending completion”, which is expected in November.
Croud and ECI declined to comment when asked whether they exchanged in order to get ahead of potential tax changes.
In addition, ECI has recently invested in other media, data and technology companies including MiQ, Investis Digital, Imagesound and Clarity Blue.
This also follows Luke Smith was promoted from UK chief exec to the agency’s first global chief executive in January this year. It appointed Avinash Kaushik, a Google senior executive, as global chief strategy officer and board director last year too.
More recently, the company hired Frederick Stallings as its first global chief data officer and Dani Jordan as its first chief marketing and integration officer. Smith said the majority stake sale will not mean any change in senior leadership.
Croud’s clients include Amazon Prime, Aston Martin, Coach, Nespresso and the VF Group (including Timberland).
It is one of a number of UK agencies to emerge in the performance marketing space and attract investor interest, both before and after the pandemic, as they have sought to expand globally.
Separately, Brainlabs sold a majority stake to a private equity firm, Falfurrias Capital Partners, and Jellyfish sold to the Brandtech Group last year.
GP Bullhound, the corporate advisory firm, advised Croud and LDC on its sale and JEGI Clarity advised ECI on the buy side.
Simon Nicholls, partner, and Alessandro Casartelli, managing director, at GP Bullhound, said: “Croud’s operating model is innovative, globally unique and enabled by its proprietary technology platform. It is rare to find a digital agency that is so clearly differentiated.”
This story first appeared on Campaign UK.
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