NEW YORK (AdAge.com) -- Money is flowing into the U.S. agency landscape again, but one group of traditional funders has been largely absent from recent deals: the Big Four holding companies.
Instead, adland's M&A chatter has been dominated by names like Dentsu, Cheil, LBi and even Hearst. The shift is driven by foreign buyers' need to break into the U.S. and the media sector's desire to break into new businesses -- and their willingness to pay top dollar to do it.
Consider Dentsu: It added Innovation Interactive, which owns digital agency 360i, Search Ignite and analytics practice Net Mining. This is its third U.S. acquisition in as many years, after picking up Ad Age 2009 Agency of the Year McGarryBowen and design firm Attik. The 360i deal is estimated at $200 million.
A year after purchasing London-based Beattie McGuinness Bungay, South Korean network and Samsung's in-house agency Cheil Worldwide took a majority stake in the New York boutique Barbarian Group. The deal was estimated between $10 million and $20 million, which is generous for an only-sometimes profitable agency with revenue fluctuating between $9 million and $13 million.
"There are people that want to establish a toehold in the U.S., so they'll pay up for it," said an agency-holding company exec.
The Big Four, on the other hand, already have plenty of presence in the U.S. and are holding out for entirely new assets or steals.
"You have that bidding war in 2009, and the Asians were coming in with more," said an executive familiar with recent deals. "Western holding companies weren't willing to pay as much anymore."
Hearst's iCrossing deal
Meanwhile, Hearst is reportedly close to a $375 million deal to buy iCrossing. This follows Meredith's moves into advertising -- the publisher has picked up agencies over the years to layer additional revenue streams on top of existing database and ad sales business.
European digital powerhouse LBi and London-based Engine Group are also looking to expand in the U.S. It's not just dominance and saturation in their home markets that's causing foreign agency networks to look abroad; they're also trying to accommodate clients that are increasingly looking for global thinking paired with local execution.
"In the last few years we would pitch for European agency of record," LBi CEO Luke Taylor said. "We are now seeing that increasingly globalized." He reports that 55% of LBi's revenue comes from global clients. For analytics, search and platforms, he finds that clients are looking for global agencies that can then wrap those big investments in local communication and insight.
With 79% of its $224 million 2009 revenue outside the U.S., LBi made moves early this year to import its brand. In February, LBi scrapped the names of two agency acquisitions in New York -- Special Ops Media and Icon Nicholson -- and merged the offices under the moniker LBi. Mr. Taylor says he's also looking to build out the agency's data-insight and e-mail capabilities, as well as its presence on the West Coast.
Dentu makes moves
Dentsu and Cheil signaled they'd buy their way into the U.S. with their first Westerner exec appointments. Dentsu added its first non-Japanese officer Tim Andree to head stateside operations in 2008; Cheil, meanwhile, hired Bruce Haines, its first non-Korean global chief operating officer.
Mr. Andree, CEO of Dentsu USA, sees his shops, 360i and McGarryBowen, as outposts for Dentsu to import the Japanese technology often light years ahead of U.S. adoption, especially in mobile.
It's not that the Big Four are completely out of the game. But several are already well-endowed in hot areas like digital. Publicis Groupe, for example, bulked up with last year's $544 million purchase of Razorfish, which gives it both the No. 1 and No. 2 ( Digitas) digital shops. Others are focused outside the U.S. Last month, Interpublic bought Cubocc, a digital agency in Brazil, which followed acquisitions in India and the Middle East. And WPP is still digesting its $2 billion takeover of research group TNS from 2008.
While Omnicom seems like the most likely candidate for expanding in digital through M&A, the exec leading that charge, CEO of Omnicom Digital Jonathan Nelson, is known as a fiscally conservative buyer. He's also busy figuring out how early acquisitions like Organic and Agency.com, and homegrown digital agencies like Tribal DDB and BBDO's Proximity fit with their traditional parents.