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Publicis Sapient / SapientRazorfish

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The Sapient brand has undergone a dizzying evolution over the past few years. Until 2015, Sapient was a leading digital design and consultancy group with a wide-ranging global footprint. Its main marketing arm was SapientNitro, created in 2009 from acquisition of highly regarded creative advertising network Nitro, and subsequently boosted with the purchase of additional local agencies in different markets around the globe. Towards the end of 2014, Sapient agreed to be acquired by Publicis Groupe for a lavish $3.7bn. Completion of the deal was delayed repeatedly by US regulators because of Sapient's government contracts, but finally took place in Feb 2015. As a result, a newly created Publicis.Sapient division became the umbrella for all Publicis digital subsidiaries including DigitasLBi and Razorfish, which initially operated alongside SapientNitro. At the end of 2016, though, SapientNitro merged with Razorfish to create SapientRazorfish. Another key attraction of the group to Publicis was its Sapient Consulting division, potentially opening a lucrative new marketplace for the French group in IT services and digital management consultancy, countering the steady encroachment of Deloitte, PwC, Accenture and others into the traditional marketing industry. It remains to be seen whether that strategy will work.

Competitors

see Leading International Agency Networks index

Brands & Activities

The precise structure of the post-acquisition Sapient is still being finalised in 2017 as Publicis completes its transformation into a more wholly integrated structure. The existing Sapient business was in effect merged with Publicis Groupe's existing digital division. A newly created Publicis.Sapient umbrella now houses the existing Sapient divisions as well as all other Publicis-owned digital units, including DigitasLBi. In Nov 2016, Publicis announced the merger of Sapient's digital marketing unit SapientNitro with Razorfish to create a united SapientRazorfish network. See separate profile.

Prior to the takeover, SapientNitro was partnered by two other distinct units. These retain a separate identity. Sapient Global Markets offers technology-led consultancy primarily to financial services and commodity trading clients. This side of the business was enhanced considerably by the group's acquisition in 2008 of UK-based Derivatives Consulting Group, which offered consultancy and outsourcing services to investment banks, hedge funds and asset management companies. Sapient Government Services offers a similar consulting service to various US government departments including the FBI, the Library of Congress and the Department of Homeland Security.

These consultancy businesses had considerable appeal to Publicis Groupe, certainly at first, since they seemed to offer an intriguing new area of operation. They also appeared to offer an important defence against other management or IT consultancies straying into traditional marketing territory. However the fit with other divisions of Publicis Groupe is only limited, and the group might ultimately be tempted to divest these non-marketing operations. No figures have yet been declared for consulting activities in 2016.

Until the recent merger with Razorfish, the main marketing services business within the old Sapient group was SapientNitro, a leading worldwide digital marketing network operating from more than 30 offices worldwide. It was formed in 2009 from the acquisition of fast-expanding traditional marketing agency Nitro Group for $31m, and its merger with the group's existing digital arm Sapient Interactive. The resulting business was designed to become a creative micro-network along similar lines to Bartle Bogle Hegarty or Wieden & Kennedy, but with a far more developed digital offering. Nitro's original roots were in Australia and China and it later moved aggressively into the UK and US. An office launched in Moscow in 2008, and Brazilian independent Santa Clara joined the family in 2009.

However, the purchase of Nitro, arguably, added comparatively little lasting value to the group other than a broader global footprint. Most of Nitro's clients and managers at the time of the takeover later departed, and the network once again came to concentrate on digital marketing, rather than the traditional advertising in which Nitro had specialised. However it was regarded as one of the clear leaders in this field, and was singled out by researcher Forrester in its Global Commerce Service Providers report as the overall leader in that segment ahead of all eight other companies surveyed, including IBM, Accenture and Razorfish. Increasingly, the largest proportion of SapientNitro's revenues had come from technology and commerce services rather than from marketing. Both SapientNitro and Sapient Global Markets were served by the group's centralised back-office operations, located in several locations in India and accounting for more than half of its global workload.

Despite the importance of the Indian back-office, the most significant unit within the international network was undoubtedly the London outpost. In 2011, the group bolstered this outpost with the acquisition of independent CRM agency Digital & Direct for £24m (around three times turnover). SapientNitro was widely recognised as one of the top digital agencies in the UK. Local entity Sapient Ltd reported turnover of £108m in 2013. However market watcher Econsultancy estimated local fee income of over £165m for 2014.

Also in 2011, the group acquired German mobile marketing agency Clanmo. Other recent additions included creative agencies Second Story and mPhsize in the US, and iThink in Brazil. In 2013, the group acquired hispanic agency La Comunidad, which now operates in the US as Community. That was followed in Spring 2014 by branded content agency Campfire.

At the time of acquisition, Sapient operated offices in 37 cities across 15 countries in the Americas, Europe and Asia Pacific.

Financials

Group gross revenues broke the $1bn level for the first time in 2011, and have continued to rise, climbing 12% in 2013 to $1.26bn. Net income jumped by 32% that year to $77.73m. SapientNitro alone accounted for more than two-thirds of revenues, or $851m, up by over 10% on the year before, with operating income of $276m. Around 63% of group revenues were generated in the US, and 10% (or $128m) in the UK.

No final figures were released for 2014 because of the Publicis deal. However, revenues for the 12 months ending Oct 2014 rose 14% to $1.36bn. SapientNitro accounted for $912m, Global Markets for $372m and Government Services for the remaining $72m.

Management

Following acquisition, Sapient president & CEO Alan Herrick became CEO of Publicis.Sapient, and joined Publicis Groupe's Directoire+ senior management committee. He moved up to chairman of Publicis.Sapient at the end of 2016, with Alan Wexler and Chip Register named as co-CEOs. Former SapientNitro CEO Wexler also took on the same role in the newly merged SapientRazorfish. Register remained CEO of Sapient Consulting until the end of 2017, when he retired, leaving Wexler as sole CEO of Publicis.Sapient. Virtually all of the senior managers inherited with the absorption of Razorfish have departed the merged group. The sole remaining senior Razorfish executive by later 2017 was Ray Velez, now chief technology officer of SapientRazorfish.

Until the Publicis buyout, Sapient co-founders Stuart Moore and Jerry Greenberg remained directors and controlled around 12% of the group's equity between them. (Greenberg is also co-founder & CEO of California sushi restaurant chain Sugarfish).

Background

Sapient was founded in 1991 by Stuart Moore and Jerry Greenberg as a business and technology consultancy, and floated in 1996, shortly before the internet boom. As a result Sapient was in a slightly stronger position to withstand the boom and bust cycle which followed, while also seizing the opportunities offered by the internet. Having peaked in 2000 at more than $500m, reported revenues plunged to $173m in 2002 and have gradually risen from that low since then. More than half of revenues are generated from IT consultancy and outsourcing. In 2006, it boosted the capabilities of its expanding interactive advertising unit with the acquisition of Miami-based integrated marketing agency Planning Group International (PGI). However the group reported a sharp reduction in profits that year reflecting charges relating to an investigation into the pricing of prior year stock-options. As a a result of that investigation, Greenberg and Moore resigned as co-CEOs and the former later left the company.

The most significant development to-date in Sapient's history was the acquisition of Nitro Group in 2009. That deal, with a price-tag of $31m, capped a decade of explosive growth for Nitro, which had become one of the global advertising industry's most talked about and fastest-expanding agency brands by 2009. Its founder and guiding light was Chris Clarke, now global CEO of the combined SapientNitro network. He entered the industry in the early 1990s when he set up a video production agency in Australia under the name Pure Creative. In 1995 he was hired by the local office of now the defunct DMB&B network to direct an ad for Mars-owned confectionery brand Twix. Unimpressed with DMB&B's script, he persuaded the client to use an idea of his own instead. Mars was pleased with the results, and encouraged Clarke to set up an office in China as well, part-funded by DMB&B.

Two years later, Pure Creative and DMB&B merged to form Pure Creative DMB&B, under Chris Clarke's management. However, as the workload mounted, Clarke became more interested in other projects, including technology company Virtual Communities. He jumped ship in 1999, selling his interests in Pure Creative to DMB&B's then-parent Bcom3, which renamed the agency Pure D'Arcy (subsequently folded into Leo Burnett). Clarke then took some time off before returning to the industry in 2002, opening new agency Nitro into the fast-expanding Chinese market. He quickly recaptured the Twix account, followed by other Mars brands, and then Unilever products including Pond's.

Nitro opened an office in Australia in 2003, picking up business from telecoms giant Telstra, among others. In 2004, Mars backed the creation of a US outpost by assigning Nitro the US accounts for Twix and Dove confectionery. Nitro established a UK presence in 2005 with the acquisition of a controlling stake in local independent Soul, as well as UK sales promotion agency River Communications. British digital agency Mook joined the fold in 2006. In 2007, the agency expanded its US presence through the acquisition of creative shop AKA Advertising, which was merged into Nitro's existing New York office. Later the same year, it acquired leading Australian independent Cummins & Partners, becoming CumminsNitro. That agency's "Best job in the world" campaign for Tourism Queensland was the biggest winner at the 2009 Cannes Lions advertising festival, scooping three of the top awards.

Last full revision 25th April 2017

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