Sources revealed key management staff at Universal McCann had been offered jobs at Initiative and at another IPG operating company, DraftFCB.
Universal McCann's 18-strong workforce is understood to have received news of the decision on Friday. It is uncertain how many staff will be laid off.
The development comes after Universal lost its $30 million Bentoel cigarettes business to MEC last year. A Universal McCann spokesman said: "It is completely untrue that the office has dissolved."