MediaCom’s acquisition of the Media Business Group inspired last
week’s most amusing pastime, the ’guess-the-price-tag’ game. Who would
have thought that TMBG was worth pounds 27.9 million?
’Good for them’ was the uniform response, but so was the surprise that
TMBG had proved quite such an attractive little number. The pounds 28
million cost represents a 40 per cent premium on TMBG’s 76.5p per share
closing price last Monday, and this in a year when the agency has waved
goodbye to around pounds 50 million of billings.
MediaCom cites TMBG’s skills set and exceptional market position as the
logic behind its acquisition. Sure, the company has some great people, a
strong professional reputation and a very good track record - this year
aside - in client retention. But in truth none of these have made TMBG
really stand out in the market. It has always been an incredibly solid
outfit, but not one with the magic star quality of a PHD or an MGM - the
last two media companies to be snapped up, and both for a lot less than
pounds 28 million.
No, I suspect that size is key to this deal. As one of the few media
independents of any size, TMBG had a value beyond its P&L for any agency
looking for instant growth. Witness the tetchiness of both MediaCom and
TMBG when questions were raised over their claimed combined billings of
pounds 500 million, which would put the company into second place in the
media league table. The latest figures from MMS give a total of pounds
333 million and a less impressive sixth position in the charts.
But even if the merger doesn’t confer top five status, it does help
solve some of the challenges faced by the two agencies. As a standalone
UK operation, TMBG risked being increasingly marginalised as business
MediaCom’s reputation in the UK market was respectable but uninspiring
and organic growth has been slow. The purchase of TMBG means a stronger
powerbase for UK growth and, hopefully, the chance to inject dynamism
and personality. But at pounds 333 million, the new company is still not
quite big enough to make a real difference in the marketplace.
Which brings me to the shock eleventh-hour collapse of the MediaVest/Leo
Burnett media merger. The deal really would have created a new number
two player in the market and its failure must mean some serious
soul-searching for both agencies.
MediaVest needs a strong international network if it is to continue
competing against its fellow top five agencies, while Burnetts needs to
make up its mind if it really is a full-service agency which takes media
as seriously as creative. If not, its media product will need a lot of
investment and the chance to cut the umbilical cord. But again, for both
MediaVest and Burnetts, size will be crucial and neither can afford to
face the long-term future alone.