Interpublic Group of Cos. forecasts consolidation among smaller rivals such as Havas SA (HAV), Dentsu Inc. and MDC Partners Inc. after two advertising giants abandoned a merger to create the industry’s largest company.
Mid-level players and independent agencies may come together to seek more of a global presence, Interpublic Chief Executive Officer Michael Roth said in an interview. Interpublic doesn’t need to do a deal and is suitably equipped with capital, he said.
“Unless you have critical mass and the kind of scale we have among the top four holding companies, it becomes more difficult to compete on a global stage,” Roth said at the Cannes Lions advertising festival in the south of France yesterday.
A planned $35 billion combination of Omnicom Group Inc. (OMC) and Publicis (PUB) Groupe SA collapsed last month over disagreements on how to run the new company. In predicting that the industry’s consolidation efforts will continue, Roth joins executives including WPP Plc CEO Martin Sorrell, who has suggested that Interpublic may be a target.
Interpublic remains on target “to at least achieve” 3 percent to 4 percent organic growth for 2014 and expand its operating margin by 100 basis points, Roth said. The company, owner of agencies including McCann and R/GA, has budgeted about $150 million for acquisitions this year and is keen on deals in digital-advertising agencies and companies in emerging markets.
The four largest ad companies are Interpublic, its New York-based peer Omnicom, London’s WPP (WPP) and France’s Publicis.
Publicis and Omnicom quit their planned merger, 10 months after announcing it, citing a clash of corporate cultures combined with tax and regulatory hurdles, which left shareholders, employees and customers in limbo. Roth said the failure was becoming more evident as the process dragged on past initial deadlines set by Publicis and Omnicom.
“I had a good sense things weren’t going as planned,” Roth said, “especially if you don’t file documents after such an extended period of time. You have to think: ‘What’s holding this up?’”
“We’re keeping our heads down and delivering,” he said. “Tomorrow someone could come along and put an offer on the table and as a public company we’re obligated to consider it.”
Interpublic shares rose 0.4 percent to $19.62 in New York, giving the company a market value of $8.3 billion.
To contact the editors responsible for this story: Kenneth Wong at email@example.com Mark Beech, Ville Heiskanen