The next round of consolidation

To float or not to float, that is the multi-billion dollar agency question. Despite the obvious financial attractions – especially for senior executives with one eye on their retirement strategy – the penalties of public company status are all too vivid when things start to go wrong.

And right now, they look very wrong indeed at True North Communications. For some time it has seemed more prey than predator in the Darwinian business game politely called “consolidation”. A wave of mergers and takeovers – BCom3 and WPP’s acquisition of Y&R being the most conspicuous landmarks – has left the minor major league players scratching about for defensive alliances. Publicis, for example, pounced on Saatchi & Saatchi.

But for True North, there is unconcluded business. Intermittent discussions with Cordiant seem to have fallen through. As do similar talks with Interpublic, a much stronger contender. In the meantime it has lost, in a traumatic blow, nine per cent of its revenues through the departure of DaimlerChrysler. Paradoxically, that might hasten a “merger”, not only by concentrating minds in the boardroom, but in unblocking a major potential source of client conflict. It would certainly clear the decks for the recently mooted merger with Havas, the network which handles Peugeot Citroën. Less welcome to Havas, or any other suitors, will be the news that True North has had to postpone reporting its results: a little problem with the Securities and Exchange Commission over an Internet investment and the writing down of goodwill, likely to make a deal difficult or even undesirable.

But there are others where that came from, especially for Interpublic. Now down to two global networks and smarting from being relegated to the world’s third-largest marketing services empire, it must be desperate to do a sensible deal. Recent speculation has centred on Grey, which is reaching its sell-by date as a single network. Interpublic chief John Dooner seems to have mooted a merger with Deutsch, an independent agency acquired by Interpublic last November as the basis of a third network. Any such deal would very much depend upon the will of Grey’s wily but ageing autocrat, Ed Meyer. The fact that Interpublic happens to handle Unilever business while Grey is a P&G network is almost an irrelevance these days.

With that in mind, there is a longer shot to be considered. Considerable interest is now focusing on the future of Bcom3, the global amalgam of Leo Burnett, The MacManus Group and Dentsu. Word on the Street is that Dentsu, currently engaged in a European and the US roadshow to promote its hefty $10bn flotation this autumn, is set for success. Word is rather more muted on the outcome of an intended IPO, later in the year, for BCom3 – particular interest focusing on McManus Group margins.

If for any reason the flotation of BCom3 does not come off, its future – at least in its present form – will be a lot less certain. That in turn could present some useful opportunities for IPG. Far fetched? Not necessarily IPG’s. General Motors and Dentsu’s Toyota have common interests in Asia. Both groups are retained by Coca-Cola. That leaves the P&G/Unilever quandary. Maybe Dooner would see that more as an opportunity than a threat.

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