WPP is poised to close a deal making it the biggest advertising group in the world, through an agreed takeover of Young & Rubicam (Y&R) for $5.5bn (&£3.4bn) in WPP stock.
The move follows months of arduous negotiations and marks the end of discussions Y&R had with Publicis. A deal with the French ad company would have resulted in client conflict with Y&R’s Ford and Publicis’ Renault business.
The Y&R takeover could trigger another wave of deals between ad groups, which want to keep up with the cost efficiency that WPP can now offer clients.
Until now, Omnicom, the owner of DDB and BDDO networks, has been the largest global advertising business.
If it wants to retaliate it could look to True North, which owns FCB and Bozell and has DaimlerChrysler on its client list. Publicis owns ten per cent of FCB, and vice-versa, but insiders suggest this will be dissolved as it is a partnership which has proved largely barren.
Industry insiders claim that most future takeover deals, will be done on the back of motoring clients – the jewel in the crown of any ad agency’s client list.
Interpublic, which owns Lowe Lintas, McCann-Erickson and handles General Motors (GM) advertising, is missing a global network after being forced to merge Lowe and Lintas networks at the start of this year.
It may make a move to acquire Saatchi & Saatchi on the back of an alliance agreement hatched last year between Toyota and GM, which has resulted in some GM brand marketing being handled by Toyota in Japan. A takeover of Saatchi, which handles the bulk of Toyota global business, would be seen as a future safeguard against any loss of GM business.
But Saatchi is a core Procter & Gamble agency and any alliance would be severely tested by Interpublic’s massive Unilever business.
Cordiant is not considered a vibrant organisation in the US, and could benefit from a takeover or merger. It is the parent company to Bates Worldwide, which has its headquarters in New York, and Scholz & Friends, which is German-based, and is generally viewed as a “lopsided” organisation.
Cordiant jointly owns Zenith Media with Saatchi, and industry insiders suggest the media agency will eventually be sold separately.
The swelled size of WPP also puts indirect pressure upon Grey, which has built its business around a P&G client base.
Ed Meyer, Grey’s ageing chairman, has so far resisted selling, but he may have little choice as the industry consolidates.