|Omnicom's John Wren is planning acquisitions.
Double-digit earnings increase
The plan was laid out in its quarterly conference call with analysts in which Omnicom revealed another double-digit earnings increase, driven by strong performance in the U.S., South America and Asia. The largest ad agency holding company said today that net income for the second quarter is up 10% to $225.8 million from $206.1 million a year ago. Revenue rose 9% to $2.62 billion from $2.4 billion last year.
Mr. Wren’s signal that some deals could be in the offing is news in an industry where most of the juiciest targets have been snatched up by the likes of Omnicom and rivals WPP Group, Interpublic Group of Cos. and Publicis Groupe. The acquisition landscape could be reinvigorated by a discipline that, though not as flashy as its advertising brethren, has caught the attention of marketers impressed by its measurability.
CRM revenue generator
Customer-relationship management, or CRM, which includes sophisticated analytics as well as traditional direct-marketing techniques, has become a vital part of Omnicom’s business in recent years as marketers have become more interested in using customer data to shape one-to-one marketing programs. For the second quarter, CRM was responsible for 34.2% of Omnicom's revenue compared with advertising’s 44.1% share. Omnicom owns a host of CRM agencies, including Rapp Collins and Targetbase.
“Our focus is on CRM and companies where there is truly a measurable return on investment that can be substantiated,” Mr. Wren said.
10 Asia acquisition targets
Omnicom’s other focus will be on Asia. Mr. Wren said he recently approved 10 acquisition targets put forth by Michael Birkin, Omnicom’s new Asia-Pacific CEO.
Before these deals get done, Mr. Wren said, the large amount of private equity money now flooding the industry and, in his mind, driving up prices will have to diminish. "There's aggressive equity funds out here who have kind of missed the point that the industry is pretty largely consolidated," Mr. Wren said. "I'm confounded by their expectations that they're going to be able to run it better than, say, we could or one of our competitors and then resell it to us at a premium."
Most recent pickup
Omnicom’s most recent acquisition, however, had nothing to do with either CRM or China. The Zimmerman Agency, a Tallahassee, Fla.-based, tourism and hospitality-focused shop was bought by an Omnicom subsidiary, Zimmerman & Partners Advertising.
While Mr. Wren’s interest in growing Omnicom’s already considerable marketing services offering is clear, one of those disciplines could be showing signs of trouble. Public relations, slow to emerge from the recession, grew at less than 1% for the quarter. Asked by an analyst about the flat growth, Chief Financial Officer Randall Weisenburger said it appeared to be a “quarterly anomaly.”