New York: Publicis Chief Executive Officer Maurice Levy, whose company has made more than a dozen acquisitions this year, predicts more consolidation in the advertising industry even if some prices, like those for London’s Aegis Plc and the US’s AKQA, are too high.
Levy said Publicis looked at buying both Aegis, which was acquired by Dentsu Inc. recently for £3.16 billion ($5 billion) and AKQA, which WPP Plc agreed to buy late last month for $540 million.
“On both companies, we decided to pass, considering that we have no strategic issues with those two assets,” Levy said in an interview on July 19. “We also considered the price paid was too high.”
Publicis, the Paris-based owner of advertising agencies including Leo Burnett and Saatchi & Saatchi, will continue to expand by buying digital assets and companies in fast-growing markets. First-half profit at the world’s third-largest advertising company rose 19 percent, though organic growth, which strips out effects from acquisitions and mergers, rose 2.8 percent, as clients cut spending amid the European debt crisis and it lost a $3 billion annual advertising contract with General Motors.
Levy, who earlier this year warned that growth would slow in the second quarter, said Publicis expects “a rebound that will give us growth that is expected to be higher than in the first quarter.”
Health care has been the worst performing segment for the advertising business, he said, as many of the big pharmaceutical companies faced restructuring.
New business
Net income for first half was €275 million ($337 million), while revenue rose 14 per cent to €3.08 billion. The company won $1.8 billion of net new business in the first half from clients including Kraft Foods, Subway and Nickelodeon. Publicis is targeting 75 percent of revenue to come from digital companies and fast-growing markets in the medium term.
The most notable of Publicis’s acquisitions this year was the UK’s Bartle Bogle Hegarty, the ad agency behind the Johnnie Walker “Keep Walking” campaign and Levi Strauss & Co.’s “Flat Eric.”
Levy said last week’s agreement by Japan’s Dentsu to acquire Aegis was a smart move. “They paid a very full price but it makes strategic sense,” he said. “I’m not sure there’s a lot of synergies but Dentsu was looking for many years at the possibility of becoming a global player.” The move places Dentsu and Aegis among the largest advertising companies in the world such as WPP, Publicis and Omnicom Group Inc.
Slowing Growth
The global advertising industry is predicted to grow 4.3 per cent this year, down from an earlier forecast for 4.8 per cent, researcher ZenithOptimedia said in June. Marketing spending slowed in April and May amid fears that Greece would leave the European Union, it said.
WPP advertising researcher GroupM on July 20 cut its forecast for worldwide ad growth in 2012 to 5.1 per cent from 6.3 per cent, citing a decline in ad investment of 8.8 per cent in Greece, Ireland, Italy, Portugal and Spain. Ad spending in the US is predicted to grow 3.6 per cent, from a 4 percent forecast late last year.
