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Advertising industry due for major upheaval?
WPP, one of the world’s biggest advertising, media and communications groups has reportedly been interested in acquiring another major player in the advertising business, Interpublic Group. This deal, though denied by WPP Chief Executive Officer, Martin Sorrell, would have seen WPP become the world’s largest advertising company.
WPP has recently been adding to its portfolio, with wholly-owned operating company Young & Rubicam (Y&R) announcing on 20th November 2013 that it had acquired a majority stake in Plasenta Conversation Agency, a Turkish social media company that employs over 60 people, whose clients include multi-national corporations Vodafone, TEB BNP Paribas, and Coca-Cola. Acquisitions in emerging markets have been very important to WPP’s growth, with 60% of the group’s acquisitions in the past decade being in these fast-growing markets. According to WPP, one of its most successful acquisitions has been the US-based digital marketing agency, Digitaria, which has seen double-digit revenue growth since its acquisition in 2010.
WPP recorded revenues of over £10.3bn ($16.4bn) during financial year 2012, an increase of 3.5% over 2011, whilst net profit was £822.6bn ($1.3bn). Though net profit has declined by 2.1% in comparison with 2011, the figures remain healthy and impressive considering the current economic climate.
Publicis Groupe SA and Omnicom Group Inc., two of WPP’s largest global competitors spoke of their plans to merge in July 2013, which is expected to happen in the fourth quarter of 2013 or first quarter of 2014. With a definitive merger agreement in place, the compound group, Publicis Omnicom Group, would have more than double the revenue of WPP with combined revenue figures (based on 2012) of £22.7bn therefore cementing its place as the biggest advertising company in the world. In light of this, it is clear to see why the rumors of WPP’s possible acquisition of Interpublic Group have been picking up speed and sparked a lot of interest in the industry. As of yet it is still a rumor, but however it pans out, the advertising industry is bracing itself for major changes in the near future.
For more information, read MarketLine’s Company SWOT Profile on WPP, and our Case Study, Omnicom: How M&A created a world-leading communications company.