Sector Report

Market Research Industry

Michael Berger

Corporate Finance Manager
18/01/19

Overview of the Market

In the UK, the Market Research and Public Opinion Polling industry is estimated to be worth a value of £3.9bn, with a growth rate of -0.9% between 2014 and 2019. This is forecast to increase to 1.3% from 2019 to 2024 to £4.1bn. Market research services are correlated with business investment as firms look to evidence the rationale for expansion and innovation. Opinion polling activity too has gained momentum in the period, spurred by demand for EU referendum opinions.

Industry revenue is expected to grow gradually over the next five years, despite being expected to fall in the first year of the period. Business confidence and spending levels are anticipated to increase slightly over the next five years, despite being restricted in the short term, supporting demand for industry services. Advertising activity is also expected to rise and increase demand for media research. The growth of web-based market research techniques and data analytics are expected to support firms investing in new research technology. Demand for public opinion polling services is expected to remain robust as EU exit negotiations continue. However, demand from the public sector is forecast to remain under pressure, limiting industry growth.

There are some large international corporations operating in the space, however, compared to other industries the concentration is low. The four largest players hold a low market share, with many smaller firms either providing niche services or servicing smaller clients. Larger firms have engaged in M&A, with firms looking to expand overseas.

Market Research Companies

A profitability analysis on the sector from a pool of 720 leading UK-based Market Research companies revealed the following points:

  • The most profitable 304 companies benefitted from an average profit margin of 9.8%
  • The least profitable 416 companies made an average profit margin of (0.2%); the industry average is 3.9%
  • 226 of the companies increased in value over the year with 157 companies increasing by more than 25%
  • 217 companies decreased in value, 122 fell by more than 25%
  • 99 companies have made a loss for two consecutive years

Based on analysis, companies were rated on their ‘takeover attractiveness’. A total of 333 companies were given a ‘Strong’ rating whereas 145 companies were given the lowest rating, ‘Danger’. 127 companies in the industry were highlighted to be highly attractive takeover prospects. London was the most attractive region for takeover prospects.

M&A Activity in the Sector

Market IQ data indicates a total of 69 significant deals in the industry from January 2011 to September 2018, with UK targets. Deals are only reported over a certain value threshold (c.£500k), therefore, it is likely that not all deals have been captured.

Upon breaking down the deal type, M&A, activity within the sector is mainly categorised by acquisitions, with 62 since January 2011. There were also 6 MBOs and one merger. A geographical breakdown of the deals shows that London dominates M&A activity, benefitting from 27 deals in the time frame. The South East was the closest behind with 11 deals being completed.

Deal flow has been scattered in each year with an up and down pattern from 2011 to 2016 with a significant dip taking place in 2013, characteristic of post-recession after-effects. In 2017, deal levels fell slightly by one deal. However, with 6 deals through September 2018, forecasting the same rate to the end of the year gives 8 deals, another reduction in deal levels. This is most likely due to Brexit and the business uncertainty that it has introduced. However, there is a demand for market research during times of political and economical turmoil, meaning that the industry has not been affected as badly as some others.

Industry Benchmarking Information - September 2018

Hallidays’ client base consists of small to lower mid-market enterprises. Our benchmarking analysis reflects businesses with turnover below £20m, in line with the majority of our clients in this sector.

Market Research Benchmarking Data Mean Median Lower Quartile Upper Quartile
Turnover Growth/Decline (%) 4.13 3.40 (14.12) 17.48
EBIT Margin (%) 6.53 6.54 (0.89) 13.04
EBIT Growth/Decline (%) 9.36 10.17 (48.56) 78.22
EBITDA Margin (%) 7.40 8.21 1.04 14.32
EBITDA Growth/Decline (%) 5.17 10.17 (46.88) 75.98
Total Net Assets Growth/Decline (%) 7.65 4.82 (9.67) 21.65
Current Ratio 2.91 1.62 1.04 2.68
Acid Test 2.90 1.62 1.04 2.68
Market Research Benchmarking

Using full company accounts filed in the last two years under the SIC-Code “732 – Market research and public opinion polling”. Excluding companies with nil turnover in either period, we have summarised key benchmarking information for businesses under £20m turnover in the table above. September 2018.

M&A Activity Source

Experian Market IQ (September 2018)
Search Criteria: SIC-Code “732 – Market research and public opinion polling”.

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