During the "creative revolution" of the 1960s, the advertising industry experienced an entrepreneurial explosion as art directors and creative teams deserted large agencies to form their own shops. The enthusiasm for ad agencies carried over onto Wall Street. Between 1962 and 1973, 24 ad agencies went public, selling their private stock to outside investors through initial public offerings.
Among the agencies that went public during this period were Foote, Cone & Belding; Ogilvy & Mather; Interpublic Group of Cos.; J. Walter Thompson Co.; Doyle Dane Bernbach; Batten, Barton, Durstine & Osborne; and Grey Advertising.
By the late 1970s, the investor enthusiasm that had accompanied the early IPOs had given way to tighter ad budgets and lackluster profits. Several agencies went out of business, some reverted to private status and others were acquired by or merged into other companies.
The market for IPOs remained cool well into the late 1990s, but other trends emerged in the industry. The U.S. economy's robust growth in the 1980s fueled activity in mergers and acquisitions, and the ad industry was no exception. U.S. ad agencies grew by acquiring agencies and complementary businesses (such as public relations and marketing research) both at home and overseas to accommodate global clients in need of a full range of services. Those transactions were primarily friendly business deals. Buyers and sellers came together seeking mutually agreeable combinations.
In June 1987, WPP Group shocked the world. Led by Chief Executive Martin Sorrell, the British company launched the first hostile takeover of an ad agency: JWT. Within two weeks after the initial tender offer, JWT, which at first opposed the deal, gave in to WPP for $566 million.
JWT had been an attractive target for acquisition. Poor earnings and a highly publicized management upheaval earlier in the year had kept its stock price low. The 123-year-old agency also had a premier client roster that included Eastman Kodak Co., Ford Motor Co., Goodyear Tire & Rubber Co., IBM Corp. and Sears, Roebuck & Co. In addition, it owned the world's largest public relations agency, Hill & Knowlton, as well as other advertising and marketing research companies.
JWT's clients, however, did not sit quietly observing the action. Goodyear, itself a target of a failed takeover attempt, announced its objection to the sale as did Ford. Immediately after the sale, Goodyear put its account in review. Ford moved its international accounts to other agencies but retained JWT for U.S. advertising.
Almost two years after acquiring JWT, WPP struck again. This time the target was Ogilvy Group. In May 1989, Ogilvy disclosed that it had received a letter from WPP offering to buy the company. The agency spurned WPP's offer, saying it was unsolicited and unwelcome. Ogilvy had been prepared for such an action, having adopted a "poison pill" financial strategy designed to protect against advances from unwanted suitors. In the end, however, WPP's offer proved too tempting to reject. Rather than undergo a demoralizing takeover process, Ogilvy agreed to be purchased for $864 million, the highest price ever paid for an ad agency up to that time.
The acquisition of Ogilvy along with JWT aligned two of the world's most reputable ad agencies under one parent, and WPP became the world's largest advertising and communications company. More than half its clients were among the Fortune 500. After WPP's takeover of JWT Group and Ogilvy, such hostile financial maneuvers were not attempted again for eight years.
Not all hostile takeovers end with a satisfied suitor. In December 1997, the French ad giant Publicis announced a $268 million hostile bid for True North Communications, a Chicago-based company that owned FCB. FCB's clients included AT&T, S.C. Johnson & Son and Levi Strauss & Co.; Nestle and L'Oreal were among key clients of Publicis. The two agency holding companies had entered into a joint venture in 1989. The relationship soured, however, and ended in 1997, leaving the two bitter rivals. Despite the separation, Publicis retained its 18.5% stake in True North.
True North executives rejected the 1997 merger proposal and instead authorized the acquisition of privately owned agency Bozell, Jacobs, Kenyon & Eckhardt. Publicis opposed the acquisition, claiming that the deal was too expensive and would not help True North expand internationally. One FCB client, S.C. Johnson, said it would leave the agency if the takeover attempt by Publicis were successful.
After a series of legal and financial maneuvers by both companies, the courts restricted Publicis from interfering with the acquisition and from pursuing its offer. True North's shareholders voted to acquire Bozell several days later.