Is Omnicom about to make another acquisition? On the face of it, the appointment of new finance boss Randy Weisenburger (MW October 1) was simply a means of replacing the retiring Fred Meyer.
But a closer look at Weisenburger’s CV reveals a buyout specialist with more than ten years experience in identifying and carrying out acquisitions for New York investment bank Wasserstein Perella. He prides himself on the purchase of cosmetics house Maybelline, which was sold to L’Oreal in February 1996. He also ran the Yardley cosmetics business which went into UK receivership this summer.
Weisenburger becomes chief financial officer at Omnicom, a communications holding company with a reputation for shrewd buying and a hands-off management style. It is on permanent alert for attractive targets.
In June, John Wren, Omnicom’s president and chief executive officer and a personal friend of Weisenburger, was quoted as saying that the company would grow 12 to 20 per cent by 2000, which was understood to indicate that more acquisitions were imminent. Omnicom’s share price rocketed and the New York Stock Exchange asked the company whether there were any “corporate developments” in store that might explain the high share price. Omnicom refused to comment.
Since then, markets have fallen as the crisis in Asia threatens to engulf the world economy, and the value of media stocks is declining. This might be an ideal time to contemplate more purchases, as share prices are depressed and marketing services can be picked up cheap.
Since Omnicom was created in 1986 it succeeded with a strategy under then chief executive Bruce Crawford of buying smaller, specialised agencies with talented management and giving them autonomy. Major purchases include Goodby, Berlin & Silverstein, TBWA Advertising, the WWAV Group, Interbrand and, earlier this year, the stricken GGT Group, which cost $235m (143m).
But Weisenburger’s predecessor, the Omnicom veteran Fred Meyer, says: “We don’t hunger and go out for acquisitions. If they make sense we make them. We are not just buying for growth’s sake. We would completely disagree that the ad industry is stagnating. In the first six months of this year in the UK, revenues without acquisitions have grown more than 15 per cent.” He admits this figure includes not just advertising but all sorts of marketing services.
One source says: “There’s no organic growth in the advertising industry that satisfies the requirements of Wall Street. Omnicom doesn’t have much option but to keep acquiring earnings. They’ll keep doing the same.”
In a world where there are a finite number of good, sizeable independent agencies, growth by acquisition gets riskier. Growth in the core business of advertising is slowing with more income being derived from premium priced non-advertising services. How long will it take before clients start to put the squeeze on these services, as they already have done with traditional advertising?
Together with Wren, Weisenburger makes the core of a new and much younger management team for Omnicom, which comprises the BBDO Worldwide, DDB Needham Worldwide, TBWA International networks and the Diversified Agency Services unit.
Wren, aged 45, has succeeded Bruce Crawford, 69, who stepped aside to become chairman. Meyer, aged 67, becomes vice-chairman to make way for the 39-year-old Weisenburger.
Weisenburger came top in his MBA class at the University of Pennsylvania, worked for Coopers & Lybrand and The First Boston Corporation and went on to become one of the founder members of Wasserstein Perella.
Speaking to Marketing Week on his first day in his new job, he has little but praise for his new employer. Asked if Omnicom is about to go on a buying spree, he comments: “If you analyse the history of Omnicom it is a combination of very strong internal growth as well as brilliant acquisitions. It’s balanced.”
Ironically one of the last investments Weisenburger was involved in was the stricken cosmetics company Yardley, a Wasserstein Perella purchase which went disastrously wrong, going into receivership in August. One Yardley insider questions what he perceives as Weisenburger’s hands-on approach within the company, which included vetting the advertising.
Weisenburger emphatically distances himself from the venture. “It was an ill-conceived investment when it was first made,” he says, making it clear that this was one decision taken before he became president and chief executive officer of Wasserstein Perella Management Partners, the investment banking subsidiary.
Meyer says of his successor: “He is a very mature guy. He listens. His reputation on Wall Street is not the important part.”
But in these turbulent times, Weisenburger’s task will be to maintain Wall Street’s respect for Omnicom management.
If the company can keep its stock price high while other organisations fall out of favour with investors, there could be rich pickings out there for an agile, acquisitive team.
Its ability to identify targets and make them work after they are bought will be a measure of whether Wren has assembled a management team as capable as Omnicom’s old guard.