S4 Capital (SFOR), the digital advertising agency headed up by former WPP boss Sir Martin Sorrell, has today announced it has merged with Australian based Salesforce specialist Destiny. The specific terms of the deal have not been disclosed.

Destiny will be incorporated within S4’s Mighty Hive division that focuses on programmatic advertising, the automation of buying and selling digital advertising space.

Although the initial share price response to the deal has been somewhat lackadaisical, (the shares are trading marginally higher at 700.5p an increase of 3.5p), the deal is a further vindication of S4’s growth strategy in two respects.

WHY THIS TRANSACTION MATTERS

First, the rapid growth in S4’s revenues has in part been predicated on finding suitable acquisition/merger targets. Today’s deal indicates that there is continued mileage in this strategy.

Second, the technology sector has been a critical source of growth for S4, accounting for approximately 50% of revenue expnsion. S4 counts Google, Facebook and Adobe amongst its marque of leading technology companies.

The key rationale for today’s deal is that the combination of Mighty Hive and Destiny will produce an improved offering to cloud computing specialist Salesforce.

This should help cement the group’s relationship with Salesforce and could result in increased revenue moving forward.

The S4 has recently benefited from a series of earnings upgrades, resulting in a marked increase in the share price. Over the last month this has increased by 15% and over a longer six-month period this has increased by 28.3%.

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Issue Date: 26 Jul 2021