Havas SA (HAV) Chief Executive Officer David Jones said the French advertising company plans to remain independent with Chairman Vincent Bollore’s backing, amid an “obsession” by some competitors to make large acquisitions.
“The majority of times these big acquisitions are great for the company being bought but not for the company buying or the shareholders,” Jones said yesterday in an interview in London, citing Publicis Groupe SA (PUB)’s 2007 purchase of online ad agency Digitas Inc. for $1.3 billion. “If you look at Digitas today versus Digitas when it was acquired, none of the key management is in place and the company is doing far less well.”
Jones said he hasn’t seen any examples of acquisitions of “real scale” where the company that did the buying is better off three or four years later. Havas, known for its Evian roller-baby commercials, spends 50 million euros ($65 million) to 100 million euros a year on takeovers, he said.
Addressing reports that Havas may look to merge with a competitor, Jones said its biggest shareholder, Bollore, is committed to the company as a strategic investment and has demonstrated his loyalty by installing his son, Yannick, as deputy CEO, as well as by increasing his stake last year.
“There’s no strategic reason why Havas needs to be bigger,” Jones said. “We have an advantage that we have a large shareholder with a long-term view,” he said of Bollore.
Havas shares rose 0.3 percent to 4.84 euros in Paris, taking the advance to 16 percent this year.
Digitas remains a “vital, vibrant agency” working with some of the world’s famous brands, Bob Lord, CEO of Publicis Groupe digital technology division, said in an e-mail. Tony Weisman, CEO of Digitas USA, has been with the company since 2006 and 2012 was a “record breaking award and net new business year,” he said.
Net income in 2012 rose 5 percent to 126 million euros as sales climbed 8 percent to 1.78 billion euros, Havas said in a statement today. Profit missed analysts’ 135.9 million-euro average estimate, according to data compiled by Bloomberg.
Like its peers, Havas is continuing to focus on expansion into digital advertising. The company next week plans to announce the formation of Socialistic China, a digital agency focusing on Greater China headed by Brendan Tansey, the former U.K. CEO of advertising agency Wunderman. The new agency is based in Shanghai and clients already include Peugeot SA, Danone SA and Hershey Co.
The total value of announced acquisitions in the industry exceeded $18 billion in the past 12 months, according to data compiled by Bloomberg. Those deals included the 3.16 billion- pound ($4.8 billion) purchase of Britain’s Aegis Group Plc by Dentsu Inc. (4324) of Japan.
WPP Plc (WPP), the world’s largest advertising company, and Publicis have spent hundreds of millions of pounds in recent years on large advertising companies as well as smaller digital advertising businesses and companies in developing markets.
“The biggest companies are usually the biggest casualties in the long run,” Jones said, citing the example of bankrupt photography company Eastman Kodak Co. “The big holding companies are global and everywhere but they’ve become very complex. The smaller end of town is by far more interesting.”
To contact the editor responsible for this story: Kenneth Wong at email@example.com.