MEDIA PERSPECTIVE: The quest for size is behind the new round of mergers

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?

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

aligned internationally.

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.


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