Goodbye, July, and no shock-waving advertising mega deal to reset the industry scales. July 2012 had Dentsu swooping on Aegis. July 2013 saw Omnicom and Publicis announce their ill-fêted union. But in July 2014 Interpublic Group failed to do what we’ve been expecting for months: something.
Ever since the prospect of Publicis Omnicom Group melted in May, analysts have been speculating that IPG must surely come into play. After all, if we accept the logic that marcoms holding companies need to beef up to match the muscle of Google or a possible Time Warner/Fox, then IPG is a covetable partner.
Elliott Management Corporation is said to be pushing Interpublic Group to investigate a sale, and soon
Which seems to be exactly the view of the billionaire investor Paul Singer and his Elliott Management Corporation, which was confirmed last week as soaking up just under 7 per cent of IPG in shares and options. Singer has a long history of aggressively demanding significant new efficiencies or asset disposal, and it’s likely the IPG investment will come with similar pressures attached: EMC is said to be pushing IPG to investigate a sale, and soon.
The view is that IPG is underperforming, that more value can be squeezed from its assets. So IPG could spend the next ten years trying to compete with Publicis Groupe and WPP in the acquisition battle, hire more top-level talent, find new operational efficiencies. But much of this demands fresh investment almost just to stand still; meanwhile, the market seems sold on consolidation to create larger units.
While IPG under Michael Roth has transformed itself from the wounded beast of the 90s, some of its biggest agencies are too often also-rans in new-business and creative excellence. At just under 10 per cent, IPG’s operating margins are well below the 15 per cent average of its competitors and, though shares are now trading well, the company has missed its quarterly earnings targets several times over the past few years. A sale of the company is said to be EMC’s preferred option.
To who? Publicis and Havas have flirted with IPG over the years, though Dentsu is now being touted as the more likely suitor as it continues to push outside of its home territory and pursue new access to capital.
Meanwhile, Roth is urging his key operational managers to ignore all the speculation and focus on continuing the progress that the company has been making over the past year or so; while the rest of the world was absorbed and distracted by the Publicis/Omnicom union, IPG quietly made improvements. With the spotlight now turned, that will inevitably be harder to sustain. And while July might have come and gone without a big deal, perhaps 2014 won’t.