Agency Holding Companies Padlock Their Acquisition Wallets

23 September 2008

NEW YORK: Global agency holding companies (multinational marketers' equivalent of Dr Evil's Mini-Me) are emulating their paymasters as the battening-down of hatches echoes through the canyons of Madison Avenue and the lush environs of Farm Street in London's Mayfair.

Industry bible Advertising Age has reviewed the impact of the credit crisis on the globe's six major holding companies – Omnicom, WPP Group, Interpublic, Publicis, Havas and Dentsu – and has also canvassed the views of the beseiged moneymen. 

From which it appears that there's only one major acquisition on the table in the upper echelons of adland right now.

Opines Bruce A Eatroff, partner at private-equity fund Halyard Capital: "There are very few large deals out there in the marketing and agency space, but certainly any large deal requiring any significant amount of financing is very difficult to do today."

"If you are a bigger company, there's probably not been a worse time to sell in a while," agrees Troy Mastin, an analyst at William Blair & Co.

While a third haruspex, AdMedia Partners' managing director Philip Palazzo chips-in: "It's clearly a volatile period, but deals are still getting done. Even with the Wall Street volatility [last] week, we have a number of deals that are still in progress that we expect to complete in very short order."

The sole mega-deal on adland's table is WPP Group's attempted $2.2 billion (€1.53bn; £1.20bn) ravishment of Taylor Nelson Sofres. But, reports AdAge, those in the know expect it to reach fruition. Or, as WARC Newsobserved two months ago: "What Sir Martin wants Sir Martin usually gets!"  

The adland knight, as ever, was in rent-a-quote mode: "Obviously, we are shocked by the fall of such significant and powerful financial institutions. However, the shocks are taking place currently in financial systems, and we have to see what the impact will be in the short term on the real world.

"To date, there has been some tightening in the US and Western Europe, but nowhere near the impact that we are seeing in the financial-services industry. There is no doubt that these shocks to the financial system must have an impact on consumer and client confidence, but it will take some time to assess how big this impact will be.

"[These are] early days to come to rash conclusions. It seems to me that the media are too focused on instant responses, when time will tell."

John Wren, president/ceo of Omnicom Group employed fewer words to say much the same: "The moves in the stock market during the last two weeks are unprecedented. While government intervention is required, it's rarely very good when the government gets involved in business. Despite the welcome stabilization of the financial markets, the underlying economic weakness in the US and Europe continues to be a concern."

And according to Michael Roth, chairman/ceo at Interpublic Group: "The volatility in the financial markets is clearly creating uncertainty for both marketers and consumers. This will require us to focus even more closely on helping our clients navigate through this environment and at the same time managing our business efficiently.

"What we are seeing is that client sectors and geographic markets are being affected differently. And while the macro environment continues to be in flux, we believe that our diversification, both internationally and in terms of marketing disciplines, should provide some degree of protection. We remain on track to deliver on our 2008 financial objectives."

Maurice Lévy

Data sourced from Advertising Age; additional content by WARC staff