"We're Still Almost Punching Under Our Weight": Why MSQ Is Gunning For Growth

Undeniably, this is a story of money. Of private equity, multi-million pound investments, of big financial bets, numbers on spreadsheets and cool-eyed deal-making.

But it’s also a story of 1000 people, working in 13 offices around the world who are pooling their skills in creativity and data and technology to help businesses grow. And in particular it’s a story of the three people who are on a journey to prove there is an alternative to the big global marketing services behemoths.

Right now, we’re at a pretty interesting moment in that story. But let’s begin in 2019.

When LDC, the private equity arm of Lloyds Banking Group, took a majority stake in the creative and technology group MSQ in 2019 it could not have anticipated the ferocious economic headwinds that were about to buffet its latest investment.

The challenging EU withdrawal agreement was swiftly followed by the emergence of Covid, lockdowns and the collapse of business as usual, war in Ukraine and a cost-of-living crisis.

But four years on – and despite the pandemic and economic turbulence – when LDC sold its stake to One Equity Partners earlier this year, MSQ’s EBITDA had grown from £6m to over £20m. The success came on the back of trend-busting organic growth and a series of acquisitions such as the Be Heard Partnership, the production studio Brave Spark, design agency Elmwood and the mobile gaming company Miri Growth. In fact, the return on its investment was enough to encourage LDC to reinvest in MSQ as a minority partner alongside OEP.

Bringing in OEP represents a significant milestone in MSQ’s story as the business now shifts gear for further international expansion and new acquisitions.

So to hear more about what the next chapters might hold we sat down with MSQ’s founder and CEO Peter Reid, executive director Kate Howe and chairman Charles Courtier to talk money, people and what’s next.

Creative Salon: What do you see as the key attractions that MSQ holds for One Equity, in terms of the model and the capabilities?

Charles Courtier: Firstly they recognised a really good business. MSQ’s track record over the last 4 years has been extraordinary – revenue is +250 per cent, profit is +350 per cent, headcount +225 per cent. And we’re B Corp certified, which is quite an achievement in the middle of this whirlwind of growth.

Secondly, they see the opportunity in the marketing services industry, as do we. The comms world is ripe for an enlightened alternative model to the holding companies. MSQ may not be unique, but it is a rare example of just that. And lastly, the potential for growth – building and expanding both our capabilities and geographic spread.

What difference does having a new investor make to the ownership structure of MSQ?

Peter Reid: From a management point of view, we're in a very similar place as we were before. So we continue to have a minority stake. So the way it's working as OEP are the lead investor, with a majority stake of roughly 65 per cent. And then we have the larger minority stake, around 20 per cent, followed by LDC, who have reinvested and have a smaller minority stake of around 15 per cent.

We’ve got about 120 people who are all shareholders in the group and it's very democratically spread so no one has a token equity stake.

Across the shareholder base everyone has realised a level of value through this new deal, but they have reinvested at least half of their proceeds back into the group, which reflects their on-going commitment.

What does that re-investment by your people say about the culture of MSQ then?

Kate Howe: I think it reinforces everyone's belief in the model. We're really striving to build something different, a challenger model in the industry. When people join MSQ they are signing up to a different way of doing things, with collaboration and joined up thinking at the core. And I think what this financial transition has done culturally has been to reinforce to everyone that the model does work, that we’re doing the right things, and that it's definitely meeting the needs of clients, because we're delivering growth as a result of that. And so I think it's given people more confidence, more belief in what we can do next, how far we can take it.

MSQ has doubled its revenue to £125 million and tripled its earnings to over £20 million since LDC came on board in 2019, despite the pandemic. What is it about your approach that has facilitated such growth?

PR: The model of being able to go to market for more specialist services as the individual capability or agency, as well as MSQ for more multi-disciplinary opportunities creates more opportunities in the wider client universe.

So, it’s partly about that, partly about the acquisitions we’ve made and partly how collaboration allows us to drive organic growth.

First, acquisitions. We are very careful to really understand why a business wants to join MSQ and wants to be part of it. And unless they are genuinely doing it to unlock future growth and we both think there are opportunities that could only be unlocked by coming together, we’ll walk away.

Similarly, every acquisition we've done, the management teams have rolled significant amounts of value into MSQ through the transaction; they’d only do that if they believed in the model themselves.

And all of this is reflected in the accelerated growth we have generally seen from agencies that we have acquired.

KH: Collaboration is at the core of absolutely everything. It’s all about these senior leaders with their sleeves rolled up, hands-on solving those complex problems for clients. And so that sense of being able to bring other people into the room that you really trust and believe in and that you're really happy to show up with, starts to play through with clients and clients start to feel like they're in really good hands, and they're actually getting genuine business partnership. All 50 of our top 50 clients work with more than one MSQ agency. And most of the top 30 work with at least two of our agencies, some of them work with three or four. And that's what's really escalating the organic growth.

Only half of our organic growth is coming from pitch wins. The rest of it's coming from existing clients giving us more, and we're very strong on client satisfaction scoring, we've got some of the very highest scores in the industry. We take that really seriously. And so any client that's not scoring us eight or more out of 10, we’re talking to them straightaway and understanding what that issue might be.

But is there a ceiling on your ability to have that that kind of magical, collaborative, super-invested structure as you keep growing? Can you keep pulling it off?

PR: I think it's a really good question and one we think about a lot. I think it is possible, but it needs a lot of ongoing hard work and consideration. But on a practical level, why I think it's possible is that we still have huge amount of potential growth outside the UK in particular. Where it becomes difficult is where you have 3000 people in the same building; on a more personal and humane level, it’s harder for people to know each other, trust each other, want to work together.

So I think we've got massive headroom to build scale in the US and around the world, but I think we absolutely would continue to build the same collaborative model. As we said, there are so many different factors that go into our ability to grow, but the culture is absolutely as important as anything. And I find myself more and more just trying to play the defender of some of the core values in the culture, whilst also recognising that things are going to change and evolve. All those core principles, they’re sort of the central magic to the whole thing.

Around 70 per cent of your revenues come from Europe, 20 per cent the US, 10per cent Asia. What’s the focus of your international strategy now?

PR: Look, we are trying to build a genuinely end-to-end, international digital group that can service the largest clients in the world and to be a genuine alternative to the big holding companies within five or even three years. So geographic growth in its own right is hugely important, and the biggest priority remains the US. It's the biggest market in the world and a lot of budgets are controlled in the US even when they’re international, but it's also the fact that we have a good foothold there already, it's where we're best established outside the UK. And actually, we've really punched above our weight and had some really good wins. So we really need a kind of CX platform over there where we can - at scale - create big creative ideas and push them out across digital channels.

In Asia, we also need to continue to grow, there's probably a bit more of an organic focus and the tech side of things is less of a priority, given the fragmentation of the market. And Europe is now much more on our agenda; from previously being a solely organic move, we’re trying to look at the market strategically and find other ways that we can unlock more growth.

And the other piece of the jigsaw is our digital vision, the role of platforms - Salesforce, Adobe, Amazon and so on - within that new world are only going to become more important. We have to deepen our knowledge in that interconnected world, integration with other tech components and knowledge of those platforms is only going to become more important. And obviously, that then links intrinsically into commerce at the other end.

So those are the functional areas that we're going to push a lot harder into.

And what about your capabilities growth strategy: how do you see the balance between creative, tech and data shifting and how will you match that with your investment strategy?

KH: Obviously, we need all of the skills and knowledge and integration capabilities around data, that’s an absolute given now. But I think what sets us apart is our equal commitment to creativity and technology. And so we talk about creativity as being one of the last true sources of competitive differentiation and advantage for brands. So creativity remains absolutely crucial in our offer and our propositions clients. And that's not going away. But what's probably a bit more unusual compared to some other groups is that in MMT we've got 220 engineers, we've also got deep tech capabilities in parts of the rest of the group. And those are capabilities we're constantly tapping into, through the creative agencies quite often, in order to be able to solve client problems.

And I think that marrying of creativity and technology is quite differentiating, and especially when you start to plug in all the partnerships that we've got, and all the certifications that we've got, and we really want to double down on that as we expand in the US.

PR: We definitely now feel that being able to develop upfront creative platforms is more important than ever. Without that you can have all the technical and digital data skills in the world, you're not going to be overly successful. And this year we’ve found our creative and media businesses are probably the strongest performing businesses in the group (albeit maybe from a slightly smaller base than some of the other businesses). It is interesting, a lot of people characterise the creative businesses as struggling but what we’ve found in the last six months is it's our creative businesses that have been as much of a strength as our digital businesses. As Kate says, it’s the two hand in hand that makes a difference.

Charles, your background is in media and it’s an area where MSQ is ramping up investment; what are the untapped opportunities in the media sector for MSQ?

CC: Delivering outcomes is what matters to clients. But the industry has become siloed between brand marketing and performance marketing. The path to growth is one connected ecosystem right across the purchase funnel. No siloes, either in how we work or in our internal organisation.

The world does not need another GroupM, OMG or Publicis Media - very big and very complex. Volume does not play the pivotal role it has in the past.

Our belief is in simple, clear structures – total transparency and client centric in organisation. The ability to be agile and flexible is fundamental – that means accepting a level of comfort with ambiguity; but no layers of complication and no siloes.

Equally important is the ability to integrate and collaborate within and without our own organisation. Doing that effectively requires refined soft skills and successful collaboration is crucial as no-one will have all eventualities covered under one roof. Walk-In Media has shown what this approach can achieve, from a standing start. And we’re actively building and developing on that in key hubs around the world.

So are you finding that MSQ itself is becoming more of a client-facing brand than your individual agencies and do you think the individual agency brands will ever disappear?

PR: The MSQ front door is probably disproportionately growing as an entry point. But what has been really interesting is that all of our agency front doors are still bringing large, new interesting relationships – and in particular our creative agencies remain really important entry points to broader client agendas (which is not necessarily what I might have expected a couple of years ago).

MSQ as a client-focussing brand is only going to grow in importance, particularly as we target more larger clients. There's multiple reasons why you might go to market as MSQ, one of which is obviously a breadth of capability, but it's also the scale of the client opportunity as well. And in the US, maybe because we haven't got quite the same level of infrastructure at the moment, my expectation is that we we're already using MSQ probably more even than we do in the UK, and I think that will continue to grow going forward.

But I also think a lot of people confuse having one company with one brand. I think we've done a pretty good job of building one company (while maintaining multiple brands) and I think that's what we need to continue to focus on doing.

And, I still believe if you put everything in one brand, all you're doing is closing off really good client and revenue opportunities.

KH: A number of our agencies are Agency of the Year this year in their own specialist categories. And so I think we’ve still got a huge amount of passion from our people to keep building their business and make them the best they can possibly be and attract the very best talent into those areas of capability. That's what enables us to show up as MSQ with the quality in breadth and depth that we have.

The large brands that we're all interested in working with, they fundamentally struggle to bring their own marketing and tech departments together. So they operate in silos, and there might be unity at board level where they are all aligned around their own growth objectives. But as soon as they leave the C suite, their teams go in opposite directions. So for us to be able to bring around the table our own people - who are not siloed, who are really united in the way that they solve problems - that can help unite client teams, that’s where we're having breakthroughs. That's why we’re designing and continually evolving MSQ to be able to play into that difficult space because that's where we can add real value that's quite differentiated.

Some of your growth is coming through acquisitions of male-led companies, so what’s your strategy for driving diversity amongst your senior teams?

KH: We're completely united that we need more women at the top and more diversity generally. It’s not just about women, we know we aren't good enough across the board at any of it, it’s something we're acutely conscious of. We're doing a lot of the things that you would expect good practice to be, such as blind CVS, lots of diverse people conducting the interviewing process and all of those things. You have to care passionately that you're gonna make a difference this time around, and every hire counts. That’s where we're united that where we've got to put our focus now.

You've all realised some value over this ownership change, and it’s a milestone. So what is motivating you all to stay engaged now for the next push?

KH: I just feel like we've got more to do. You know, we've got a great strategy that I believe in, we’ve got we've brought in some fantastically good people who I really believe in and really enjoy working with. And I feel like we're a long way from the end of the road, there’s still so much potential in the business, so much opportunity to go further, do more, with more clients where we add more value. And you know, as a result of that, you get to bring in yet more good people, and you're creating amazing career opportunities for the people within the group. It's so satisfying, rewarding and I’m thoroughly enjoying it, and feel very privileged to be in this industry.

CC: When I left WPP I had no intention to do anything in the marketing world. But seeing the raw potential of MSQ married with the opportunities that PE backing creates got me interested again. The marketing world needs new models. And then there’s the people. They’re spirited, entrepreneurial, enthusiastic. There are no divas. So it’s fun, and that’s really important.

MSQ sits now on the cusp of another step-change in size, development and success. So it’s an exciting time. If we achieved again what we did in the last 4 years that would be an extraordinary result – but I believe we will do much more. And with the team we have plus the backing of both OEP and LDC, anything is possible. The job only feels half-done. I think MSQ is just getting going. But I’m still planning on owning a vinyl record shop one day.

PR: The opportunity here is way bigger than it has been at any point in time. To me it feels like we're still almost punching under our weight, in that I think we've made a lot of progress with the brand but we're still nowhere near as well known as we should be. We're a work in progress from a brand and a name recognition point of view. And I like the fact that in a way we're probably more substance than style, but I still think we need to address that as well.

KH: Yes, there’s definitely nothing arrogant about MSQ. Obviously, we're really proud of how far we've come and what we've achieved in the last four years. It’s been extremely hard work and we would never have got here without all of our people working so hard and without being fortunate enough to work with some brilliant clients. And to Pete's point, if anything perhaps we are going to have to start shouting a bit louder about what we have achieved and what we can do. But that lack of arrogance is also is one of the things that makes this a really nice place to be.