The Q1 2012 earnings season begins with a majority of the big ad agency holding companies as potential acquisition targets—and the three biggest networks enjoying the plight of their smaller brethren.
There is always chatter about whether one or more of the major networks will get bought or merge with another, especially since the top three—WPP, Publicis and Omnicom—have pulled so far ahead of the others in size.
I'm not saying a deal is imminent. Just that it's strange that the industry—which has a history of aggressively acquiring and consolidating within itself—has entered a semi-permanent period in which a majority of the participants are potential M&A targets of the minority.
In the last year, the four smaller Western networks—Interpublic, MDC Partners, Aegis and Havas—have all been named as either potential acquisition targets (or in need of exploring their "strategic options," as Wall Street M&A people like to say).
And that's not counting surprise attacks from Eastern agency networks such as Dentsu, which came into a cash windfall earlier this year and may want to invest it in the U.S., where post-recession ad revenues are growing like spring daffodils.
Here's a look at each of the major agency networks, and the circumstantial evidence that they may either acquire or be acquired.
WPP Group—too big to fail.
WPP, which owns venerable agency brands such as Ogilvy, Y&R, JWT and the research giant Kantar, is the largest of the advertising companies by revenues.
CEO Martin Sorrell is an aggressive acquirer of new agencies and loves to make triumphant, category-transforming deals. He has occasionally suggested that his arch-rival, Publicis, ought to acquire Interpublic, but it's not clear whether he really thinks that's a good idea or if he just wants to see his two immediate rivals hobbled by merger turmoil.
One thing is sure: If either of the other Big 3 networks makes a deal to create a network bigger than WPP, Sorrell will be unlikely to sit idly by.
Omnicom—higher digital profile needed.
There's nothing fundamentally wrong with the second biggest network, but Omnicom (which owns agencies such as BBDO, TBWA and DDB) has always suffered from the impression that it lacks the equivalent digital assets that WPP and Publicis have acquired in the last decade.
In 2011, for instance, CEO John Wren ordered all his staff to finally become au fait with Facebook and Google. Wren has been gunshy of digital acquisitions since a disastrous foray into the sector in the late 1990s.
Fast forward to 2012, and London and New York are littered with successful new mobile and social media agencies like TBG Digital, Buddy Media and Millennial Media. Why not roll a few of them up?
Publicis—new CEO will want to make his/her mark.
The big corporate strategy news at Publicis (which owns Leo Burnett, Saatchi & Saatchi and Digitas) is who will succeed longtime CEO Maurice Levy? He is set to retire under controversial circumstances due to the size of his compensation package. There's a great deal of speculation as to his successor.
Whoever succeeds him faces the unenviable task of differentiating his or her reign from that of Levy, and keeping pace with WPP and Omnicom. One potential solution: A dramatic takeout of another company.
See the rest of the story at Business Insider
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