Omnicom Group President-CEO John Wren has mapped out an acquisition strategy that may heat up in the coming months with targets likely to include customer-relationship management firms as well as agencies in Asia.
Double-digit earnings increase
The plan was laid out in its quarterly conference call with analysts in which Omnicom revealed another double-digit earnings increase, driven by strong performance in the US, South America and Asia. The largest ad agency holding company said on July 27 that net income for the second quarter was up 10 per cent to $225.8 million from $206.1 million a year ago. Revenue rose 9 per cent to $2.62 billion from $2.4 billion last year.
Wren’s signal that some deals could be in the offing is news in an industry where most of the juiciest targets have been snatched up by the likes of Omnicom and rivals WPP Group, Interpublic Group of Companies and Publicis Groupe.
The acquisition landscape could be reinvigorated by a discipline that, though not as flashy as its advertising brethren, has caught the attention of marketers impressed by its measurability.
CRM revenue generator
Customer-relationship management, or CRM, which includes sophisticated analytics as well as traditional direct-marketing techniques, has become a vital part of Omnicom’s business in recent years as marketers have become more interested in using customer data to shape one-to-one marketing programmes.
For the second quarter, CRM was responsible for 34.2 per cent of Omnicom's revenue compared with advertising’s 44.1 per cent share. Omnicom owns a host of CRM agencies, including Rapp Collins and Targetbase.
“Our focus is on CRM and companies where there is truly a measurable return on investment that can be substantiated,” Wren said.
10 Asia acquisition targets
Omnicom’s other focus will be on Asia. Wren said that he had recently approved 10 acquisition targets put forth by Michael Birkin, Omnicom’s new Asia-Pacific CEO.
Before these deals got done, Wren said, the large amount of private equity money now flooding the industry and, in his mind, driving up prices, would have to diminish.
“There are aggressive equity funds out here who have kind of missed the point that the industry is pretty largely consolidated,” Wren said. “I’m confounded by their expectations that they’re going to be able to run it better than, say, we could or one of our competitors and then resell it to us at a premium.”
Omnicom’s most recent acquisition, however, had nothing to do with either CRM or China. The Zimmerman Agency, a Tallahassee, Florida-based, tourism and hospitality-focused shop was bought by an Omnicom subsidiary, Zimmerman & Partners Advertising.
While Wren’s interest in growing Omnicom’s already considerable marketing services offering is clear, one of those disciplines could be showing signs of trouble. Public relations, slow to emerge from the recession, grew at less than 1 per cent for the quarter. Asked by an analyst about the flat growth, Chief Financial Officer Randall Weisenburger said that it appeared to be a “quarterly anomaly.”