Barclays Private Equity acquires The Mill, the market leading visual effects company, from The Carlyle Group for £119m

Video content provider for Nike 2010 World Cup advert
Barclays Private Equity (“BPE”), one of Europe’s leading mid-market private equity investors, today announces that it has acquired a majority stake in The Mill (“the Company”), the award-winning video content business for global brands and advertising agencies, from global alternative asset manager The Carlyle Group (“Carlyle”) in a transaction that values the Company at £119m.  

The Mill is best known for producing sophisticated digital visual effects for major brands including Nike, Ford, T-Mobile, Sony, Adidas, Lynx and Barclaycard.  For Nike, The Mill helped create an epic 3-minute advert called ‘Write the Future’ that had its worldwide debut on Facebook during the 2010 football World Cup and, within two weeks, received a world-record 14 million hits on YouTube.

Established in 1990, The Mill provides digital visual effects (“VFX”) for advertisements made for television, the internet, outdoor advertising screens and mobile devices.  The Company has offices in London, New York and Los Angeles, employs 625 staff and has a client list that includes all the leading advertising holding companies (Omnicom, WPP, Publicis Groupe and Interpublic) and agencies such as AMV BBDO, Ogilvy, BBH and McCann.  The Mill also works for broadcasters and television production companies such as the BBC, Shine and Impossible Pictures on dramas including Doctor Who, Merlin and Primeval and for games developers and publishers including Sony Computer Entertainment and EA.

Carlyle Europe Technology Partners (CETP) acquired The Mill with its Senior Management team in February 2007.  Its backing supported The Mill in embarking on a series of new strategic growth initiatives including developing its core strengths in the advertising VFX segment, developing its offering for interactive channels and video gaming, opening a new office in Los Angeles and expanding its geographical reach with a focus on Asia.

The development of The Mill into an industry-leading digital content business mirrors the strong growth trend in television advertising expenditure and the emergence of video-rich content as the largest contributor to online advertising growth.*

In the year to 31 December 2010, The Mill generated revenues of £74.2m.  The Company is a leading player in the VFX segment of the video and brand communications market in the UK and USA and a growing presence in emerging markets.  This was recently enhanced with the opening of a joint venture in Singapore with the UK-headquartered creative agency BBH.  The senior management team of The Mill is led by its co-founders: Chief Executive Robin Shenfield and Chief Creative Officer Pat Joseph, who will remain with the Company following the transaction.

BPE’s funding will be used to support the Company’s:

• Continued organic growth, especially meeting increasing client demand for VFX services in Los Angeles where it is moving to a new and bigger location in July
• Opportunities in adjacent markets such as digital advertising and creating cinematic sequences for video games
• Further expansion into emerging economies, such as those in Asia and South America

Steven Silvester, Director at BPE, commented:

“The Mill is a very exciting company in a dynamic and growing sector.  Its management team is first class and has successfully grown the business over a long time period through a continued commitment to creative excellence and a strong focus on the advertising market.

“BPE believes that the changes in the advertising market and the proliferation of the opportunities for brands to interact with their customers via the moving image play to The Mill’s core strengths and provide a very attractive opportunity for the Company.  The Mill is a leading player in its field and well positioned to capitalise on the emerging market trends.  We look forward to assisting The Mill in building on its core strengths in the advertising VFX segment and developing its offering for interactive channels, video gaming and further strengthening its geographical reach with a focus initially on Asia.”

Robin Shenfield, Chief Executive of The Mill, said:

“The rapidly growing demand for creative moving image content across all platforms has been a huge driver for us over the last few years, allowing us to generate good revenue growth even through the economic downturn.  We are delighted that Barclays Private Equity shares our vision for future growth. Their support will enable us to realise our potential across high growth areas in digital video content for the web, mobile and video games and to expand geographically into key emerging markets such as China, India and Brazil.”

Robert Easton, Managing Director and co-head of Carlyle Europe Technology Partners, said:

“The Mill has proved to be an excellent investment for Carlyle, having delivered strong growth and robust performance even through challenging economic times.  We congratulate Robin and his team for their extraordinary achievements over the past four years, in which time revenues have almost doubled and headcount has increased by 150%. We are particularly proud of the role we have played in the company’s growth and development.  We wish The Mill and Barclays Private Equity every success with the business going forward.”

Debt financing for the transaction was provided by Lloyds Bank Corporate Markets Acquisition Finance, Bank of Ireland and GE Capital.

*  Zenith Optimedia Group’s March forecast of advertising trends predicts that global advertising expenditure will grow by 4.2% in 2011 to reach 0.8bn with Latin America and Asia Pacific growing at 7.0% and 6.5% respectively.  China will become the 3rd largest advertising market in 2012 and Brazil the 6th largest.  In 2011, television advertising will take a 40.0% share of total advertising spend (up from 38.2% in 2008) and internet advertising will overtake print media to become the No2 advertising medium.  Video-rich content will increase its share of online ad spend to a 32.0% share by 2012.