NEW YORK (AdAge.com) -- This summer, agency holding companies kept busy with a bit of housekeeping.
Omnicom Group, WPP, Interpublic Group of Cos. and MDC Partners in the past few months have all streamlined the number of individual shops and agency offices sitting under the same umbrella -- sweeping underperforming entities under their stronger siblings and combining agencies to create scale and expand geographic footprint. And it's not over: CEOs of those companies and observers say there's more to come this year.
Why now? "If it's not clear it's a platform you want to have," it's a good time to decide to eliminate that property, said one analyst who covers the space and did not wish to be named. He noted that because business is rebounding, the timing might be linked to holding companies "re-evaluating what the right number of operating units are and the [what the right amount of] scale is to serve large clients."
WPP and Interpublic declined to comment, and Omnicom could not be reached. But a number of senior industry executives suggested to Ad Age the timing of such moves is linked at least partly to the economy. As the industry climbs out of last year's deep recession -- and tries to avoid slipping into a double dip (see related story, P. 1) -- agencies have seen the benefits of being more efficient.
After years of sagging performance from its Agency.com brand, Omnicom in July finally announced it was collapsing the Chicago office of the digital agency into E-Graphics Worldwide, TBWA's global production services arm. It's understood that Agency.com outposts globally will fall into the TBWA network down the road. Also this summer, the world's largest holding company, WPP, merged two of its health-care ventures, CommonHealth and Ogilvy Healthworld. That created what Ad Age's DataCenter ranks as the world's third-largest health-care agency network, giving CommonHealth, which has a strong domestic presence, access to Ogilvy Healthworld's sprawling footprint in 33 countries.
Interpublic Group of Cos. appears increasingly active in this area. In the span of two weeks in August, California-based Dailey & Associates was aligned with DraftFCB in a bid to strengthen the single-office agency by giving it access to customer-relationship marketing leader and large global network Draft. Around the same time, Campbell-Mithun, Minneapolis, announced it would absorb the 50-person local office of digital agency MRM -- a decision Campbell-Mithun CEO Steve Wehrenberg said was driven by a comfort level with MRM from working on shared accounts over the years.
Uniting agencies under the same holding company is generally less thorny than other adland mergers, typically sparking few client conflicts and many more synergies. Case in point: the WPP move. Since both of those health agencies service Novartis, Pfizer and GlaxoSmithKline, it made for a smoother process.
By far, the agency umbrella group leading the streamlining trend is Toronto-based MDC Partners. In July, MDC's premiere agency brand, Crispin Porter & Bogusky, absorbed sibling agency Zig, a well-known Canadian-shop, and rebranded it CPB Canada. The same month, Kirshenbaum Bond Senecal & Partners, on the heels of gobbling up Atlanta-based sibling Fletcher-Martin, absorbed multicultural shop Adrenalina.
Asked about the moves, MDC CEO Miles Nadal said, "It is definitely accelerating."
"The changing media landscape means a lot of firms are looking for assistance in social media, investment in technology and pure scale," Mr. Nadal said. "Clients are looking to consolidate the number of partners they do business with, and you need to have the resources and scale."
Mr. Nadal denied that MDC's combining agencies was linked to a potential sale of the holding company down the road, but pointed out that MDC this year has built what it calls as a "shared services group" to identify more of these opportunities within its portfolio.
Said Mr. Nadal: "There's a lot of brilliantly talented firms that are great at what they do but could benefit from bigger platforms" and, on the flip side, the bigger firms benefit from "more depth of talent and more bench strength."
"You'll see our biggest platforms expand geographically and in their offerings. There's more to come, and the reason why is that it's proven that people can have their cake and eat it, too; they can have their entreprenurial DNA but the resources of a bigger organization. We're working on three or four more [deals] that I think are going to be really exciting."