As smaller ad firms faced the pinch to reduce costs during and
after the Great Recession, they offered a lucrative option for
takeover by larger firms. Moreover, ad firms received lesser
contracts from companies, which reduced their ad budgets to
sustain the macroeconomic challenges.
The advertising industry benefits from large economies of
scale. The cost structure of the industry is more fixed, compared
with other marketing businesses, which make it favorable for
smaller companies to collaborate.
Let us look at some key merger & acquisitions that have
taken place in the ad industry in the recent past:
Omnicom & Publicis Groupe
The biggest merger in the industry was probably the
Omnicom Group Inc.
Publicis Groupe SA
) in Jul 2013 to create Publicis Omnicom Group. The merger of the
world's second- and third-ranked advertising companies created
the world's biggest communications, advertising, marketing and
digital services company with $22.7 billion in revenues.
The deal and the eventual formation of Publicis Omnicom Group
) as the #1 advertising company. WPP has been a leader in the
advertising world since 2008.
WPP & PennyWise
WPP's subsidiary, Ogilvy & Mather (O&M), inked a deal
in Sep 2013, with PennyWise Solutions Pvt. Ltd. (PennyWise), an
India-based digital technology and production company, to acquire
a majority stake in the latter. The deal marks an important
milestone in WPP's efforts to build its presence in the
fast-growing markets and sectors.
Millennial Media & Jumptap
Joining the bandwagon, mobile advertising and data provider
Millennial Media Inc.
) inked a definitive agreement in Aug 2013 to acquire
privately-held mobile advertising platform Jumptap, Inc. The
combined entity has a complimentary product portfolio that is
likely to result in economies of scale in the fast-growing mobile
Dentsu & Aegis
In Mar 2013, Japanese advertising agency Dentsu Inc. acquired
UK-based Aegis Group Plc to form one of the biggest global media
and marketing networks. The strategic move was aimed to give
competition to behemoths like WPP and Omnicom.
The Possible Upcoming Targets
Apart form the cost-saving benefits, the growing influence of
digital media in marketingis also believed to have played a key
role in the recent mergers and acquisitions in the ad industry.
It is believed that these mergers will lead to greater scale and
efficiency in digital marketing.
The mergers are expected to enable the ad firms to collate
their resources to work more effectively with major Internet and
tech players like
) among others.
Moreover, it is also believed that the consolidation will
increase the bargaining power of the ad firms while negotiating
with media companies and publishers, who previously had an upper
hand in bargaining. The proposed Publicis Omnicom Group will
reportedly control 40% of the ad spending in the world.
The Omnicom-Publics merger has probably triggered the
probability of more consolidations in the industry going forward.
The mergers have resulted in fewer players in the advertising
Moving forward, WPP may also strive to regain its leading
position by acquiring some other firms in the industry. Analysts
The Interpublic Group of Companies, Inc
MDC Partners Inc.
) may choose to sell their businesses.
The Interpublic Group of Companies, Inc
N.Y.-based Interpublicis the third largest adverting company in
the world. It offers a range of advertising and marketing
communication services along with public relations, meeting and
event production, sports and entertainment marketing, and
corporate and brand identity in more than 100 countries.The stock
is trading at a forward P/E of 20.49x and has a long-term
earnings expectation of 9.7%.
MDC Partners Inc.:
Headquartered in Canada, MDCA provides marketing communications
including advertising and media, interactive marketing, direct
marketing, public relations, corporate communications, market
research and development across the U.S, U.K. and Canada. The
stock has a long-term earnings expectation of 10.50%.
France-based Havas offers a broad range of marketing services
including brand strategy and consulting services, and advertising
and media expertise services. The company has operations spread
across the globe including Europe, North America, Asia-Pacific,
Africa and Latin America.
AMAZON.COM INC (AMZN): Free Stock Analysis
FACEBOOK INC-A (FB): Free Stock Analysis
GOOGLE INC-CL A (GOOG): Free Stock Analysis
INTERPUBLIC GRP (IPG): Free Stock Analysis
MDC PTNRS INC (MDCA): Free Stock Analysis
MILLENNIAL MEDA (MM): Free Stock Analysis
OMNICOM GRP (OMC): Free Stock Analysis Report
PUBLICIS GP-ADR (PUBGY): Get Free Report
WPP PLC (WPPGY): Free Stock Analysis Report
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