$43.6B U.S. agency revenue
WPP, the largest agency holding company by revenue, maintained its acquisition momentum in the first quarter by striking deals for 6 tech firms and 10 marketing and communications companies, according to research by M&A advisers Results International.
Omnicom Group , No. 2 by revenue, bought seven marketing and communications companies in the first quarter and Publicis Groupe, No. 3, bought five. Neither bought any tech companies, despite their claim that their now-abandoned merger plan was partly motivated by competition from tech giants like Google and Facebook.
"WPP is the only one doing tech deals," said Jim Houghton, a partner at Results International. "It's ironic, given that Publicis and Omnicom wanted to focus on a new, technology-driven world -- a world that might have looked a bit like what WPP is doing."
WPP deals in the first quarter included the purchase of a majority stake in Cognifide, which it described as a U.K. digital technology consultancy; the acquisition of XMKT Group, a marketing services agency in China; and an investment in Percolate, a content-software startup.
Omnicom and Publicis acquisitions are usually traditional in structure, buying up companies and assimilating them into the larger group, according to Mr. Houghton. WPP often acts more like an acquisitive tech company, by acquiring a smaller stake, sometimes in earlier stage companies, and being prepared for some to succeed and others to fail, Mr. Houghton said.
Mr. Houghton, who led European M&A activity for Omnicom's Diversified Agency Service division from 2000 through 2005, also noted that Omnicom stepped up its acquisitions towards the end of last year. "At Omnicom there's a layer of facilitators and enablers -- very senior people who do not have P&L responsibility but whose job is to spot opportunities for people and clients," he said. "They may have been spooked by the merger and taken on an M&A role, creating a sudden spike in activity last fall."
Publicis Groupe may have made the fewest acquisitions of the big three in the first quarter, but Mr. Houghton said that it had kept up its usual pace throughout the attempt to complete the merger, continuing a focus on digital and emerging markets.
He also argued that the largest agency holding companies have limited avenues for growth beyond buying up other companies. "Arguably the big three have reached their limits," he said. "The back office is as consolidated as it can get, and the network brands are as big as they could conceivably be. There is a law of diminishing marginal returns, and there is only so much you can do to consolidate a business that revolves around personalities and culture."
In 2013, WPP was the most active buyer in marketing communications, closing 54 deals across the year, followed by Publicis with 19 deals. Omnicom made nine deals last year.