Young & Rubicam’s flotation on Wall Street this week is unlikely to
set pulses racing among many readers outside Greater London House, but
it should. An initial public offering (IPO) of pounds 250 million (at
pounds 15 a share) is roughly 20 per cent of the company. It may be
happening a long way from home but it is fascinating, both on a macro
and micro level.
The IPO will be a real test of the advertising industry’s standing among
the greater business community. In the UK, WPP and the Abbott Mead
Vickers group have made huge strides in making the sector respectable
again in the City after the Saatchis debacle. On Wall Street,
advertising hasn’t had such problems. Omnicom and the Interpublic Group
stocks have experienced phenomenal growth over the past year. The
Saatchis episode was viewed as a London problem - and just reward for
personal and corporate hubris.
If, as expected, the flotation is a success, Y&R (how long before the
holding company changes its name?) will come under greater pressure to
achieve growth. True, the group has experienced a remarkable turnaround
in the past two years ahead of the IPO, but it is not clear how much of
this was done to make the IPO more attractive. Y&R will have a pounds
250 million war chest and, clearly, the chief executive, Peter
Georgescu, is going to have to spend it.
If you’ve read this far, you’ve probably just perked up - especially if
you work at Bates Dorland, Euro RSCG, FCB or Saatchi & Saatchi. Although
it is likely that acquisitions will be made in local markets, FCB’s
European boss, Harry Reid, is more likely to be having conversations
with bigwig Y&R players than, say, Partners BDDH’s Leslie Butterfield or
Duckworth Finn Grubb Waters’ Micky Finn. But Butterfield and Finn
shouldn’t worry - if FCB doesn’t do a deal with Y&R, they will probably
be next on Reid’s list.
Y&R needs to acquire a second-string advertising network to handle
global competing business, but it will look to buy new-media and
database marketing companies too. Once it has acquired those, it will be
looking to buy more.
After going public, the quest for growth becomes relentless. Don’t take
Maurice Saatchi’s word for it, ask GGT’s Mike Greenlees (or Anita
Roddick, George Davis, Richard Branson and Lord Sainsbury). You might
also try John Wren, whose Omnicom is now the world’s largest marketing
services group. His shopping list appears to know no bounds,
particularly in the cause of turning TBWA into a genuine third
The moral of this story? On a serious note, it’s to be remembered that
there’s no such thing as a free investment. On a (slightly) less serious
note, if messrs Wren, Georgescu or Reid phone, take the call!