WPP is acquiring digital agency AKQA, the companies have announced.
The agency is among the last big digital shops not yet public or owned by a holding company. The San Francisco-based agency, which is backed by private-equity firm General Atlantic, had gross assets of $282 million to close the year and forecasts of $230 million in revenue for this year, up from $189 million in 2011, according to WPP.
The timing of the announcement is indicative of its significance -- the companies chose to make the news as the Cannes ad festival, arguably the biggest global gathering of agencies and their clients, is in full swing. For AKQA, it's hardly the first time a deal has been on the table.
In 2010, AKQA was in talks with Japanese agency company Dentsu. However, Dentsu exited those talks. Dentsu's U.S. branch withdrew from discussions because of a "huge financial difference" between the asking price of $550 million to $600 million and what Dentsu was willing to pay, one person familiar with talks said at the time.
"This is the third time knocking," said WPP CEO Martin Sorrell of the agencies' relationship, in an interview with Ad Age . "We'd tried twice before, they turned us down twice before. Call us third time lucky."
For AKQA Chairman Tom Bedecarre, the deal makes sense now because his agency is setting its sights on further international expansion.
"It's the right time in our growth stage," Mr. Bedecarre told Ad Age . While AKQA will keep its brand among the biggest agencies in the world, the plan is to leverage partnerships with rest of the company. "We'll be up with the big boys at the WPP table and its media agencies."
The deal started to come into focus months ago at the Consumer Electronics Show in Las Vegas in January. Moving into WPP is somewhat of a homecoming for Mr. Bedecarre, who has spent time at Ogilvy in New York.
Mr. Bedecarre and Founder-CEO Ajaz Ahmed will remain shareholders in AKQA. General Atlantic has divested its stake, with WPP holding the majority.
Purchase price was not disclosed; however, AKQA's enterprise value is $540 million and it's believed that the price hovered around that . WPP said it may shed more light in that regard on its analyst call.
The acquisition is subject to regulatory approval.
AKQA employs 1,160 people worldwide with offices across the U.S., Europe and Shanghai. AKQA's expertise is in integrated digital communications campaigns, social media, mobile, gaming work, and content creation. Clients include Delta, Diageo, EDF, GAP, Google, Microsoft Xbox, Nike , Target , Unilever and Virgin Money.
AKQA will exist as a standalone brand within WPP, the largest ad holding company. Mr. Ahmed and Mr. Bedecarre will stay on, with Mr. Bedecarre also becoming president of WPP Ventures, tasked with identifying digital investment opportunities.