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Interpublic is supposedly courting MacManus, which recently broke up with Leo Burnett. Burnett just started a fling with Dentsu, which is already entangled with Young & Rubicam. Y&R has its own intrigue, rumored to have recently rendezvoused with WPP.

It sounds like a soap opera, but this is how the ad world turns these days.

Every week since early January-when Procter & Gamble Co. loosened its conflict policy-the ad industry has been rife with takeover rumors. Executives of holding companies are turning up in each other's suites, and agency chiefs have met in out-of-the-way places for lunch-hour powwows.

In a mating dance unrivaled by any species in nature, ad agencies are wooing and rejecting each other faster than you can say D'Arcy Masius Benton & Bowles.

Even after a decade of matches and mergers-which gobbled up a considerable chunk of the country's mid-size independent agencies-further consolidation is inevitable, experts predict.

"Nothing will surprise me outside of an Interpublic-Omnicom merger," said O. Burtch Drake, president-CEO of the American Association of Advertising Agencies. "Beyond that, anything can happen."

The ad industry is on the cusp of even more activity as holding companies' appetites continue to grow. The latest rumors claim Interpublic Group of Cos. talked with MacManus Group and WPP Group met with Young & Rubicam.


Like others executives, Martin Sorrell, CEO of WPP, wouldn't comment on the speculation. However, he believes the ad business is no different than other industries, where issues such as globalization, new technology and overcapacity are sparking consolidation.

"In that environment, I think you will see five companies dominate," Mr. Sorrell said. "That includes WPP Group, Interpublic, Omnicom, Dentsu and Y&R. . . . What I'm talking about is sensible consolidation. It doesn't mean breakneck, ego-driven, size-for-the-sake-of-size acquisition."

Adds analyst Karen Ficker of ING Baring: "You will probably have a situation where an oligopoly is going to exist, with a half-dozen or so large multinational holding companies." To be in the top tier, "you have to be large and diversified. Anybody in the middle tier will be forced to partner."

Experts point to several factors contributing to the mating mania: marketers' itch to globalize, healthy balance sheets that have plenty of breathing (and growing) room and a healthy economy. Analysts predict ad industry earnings will grow 15% or more annually for the next five years.

Investment experts say mergers are a sound way to boost share. Typically, any big company that has less than 20% share of the market has ample room to grow through acquisitions, said Jeffrey Hooke, investment banker and author of "M&A: A Practical Guide to Doing the Deal."

The ad industry's three biggest players-Interpublic Group of Cos., Omnicom Group and WPP Group-each control less than 10% of the $200 billion U.S. ad market, making them voracious sharks in the feeding frenzy.


Add to that clients that demand a worldwide network. P&G, for example, recently consolidated the bulk of its business with its four global agencies, citing a need to streamline international activities.

P&G's new conflict policy allows holding companies to handle rival brands at sibling shops and frees roster shops to handle competitors' brands in other categories.

For instance, P&G's agency for Cover Girl, Grey Advertising, New York, is now free to bid for a Unilever brand, as long as the pitch is not for a cosmetics product. Previously, Grey was barred from pitching any new business that involved archrival Unilever.

Many in the ad world point to the loosening of policy as the trigger for the next round of mergers. Others aren't convinced the change is a watershed.

"You can't assume that Procter's decision will be acceptable to the other package-goods companies-Unilever, Kimberly-Clark, Henkel," said Abe Jones, managing partner at AdMedia Partners, an investment broker specializing in the ad industry. "The Procter change raises possibilities that weren't there before, but it's simplistic to say, yes, [rapid consolidation] will now happen."

Many debate whether bigger is necessarily better. Bill Whitehead, president of Cordiant Communications Group's Bates USA, believes consolidation has the potential to have a negative effect on clients, as well as on the industry.


"It's not buying to build a better battleship," he said. "It's buying to build the bottom line. I still believe the key to acquisitions is maximizing intellectual capabilities." The rumor regarding Cordiant: It's in discussions with True North.

In a business where ideas and people are a company's most valuable assets, a good deal hinges on top management sticking around after the papers are signed. But there are no guarantees. On the other hand, if agencies acquire young, talented managers in an acquisition, those new people can positively factor into a sagging succession plan.

Grey, for example, is often criticized for lacking a succession plan. Pundits say it could use the top talent a merger would provide.

Ed Meyer, Grey's president, chairman and CEO, dismisses the scuttlebutt. The 72-year-old Mr. Meyer said he's already chosen his successor: Bob Berenson, currently president of Grey USA. And, Mr. Meyer said, there are five or six other people behind Mr. Berenson.

Mr. Meyer also maintains that Grey will remain independent.

"The largest agencies have a clear self-interest to argue that there will only be four or five agencies left," he said. "I don't believe that. It's self-serving."


Most publicly traded companies jump at any chance to boost earnings. One of the fastest ways to do that is to buy a company growing at a faster clip. While analysts and industry execs agree it's not a long-term strategy, "increased efficiencies," "streamlined costs" and "synergies" can boost profits for several years.

Since 1996, Interpublic and Omnicom each have reported annual revenue growth of 15% or higher. A third of that has come from acquisitions, according to James Dougherty, Prudential senior information services and advertising analyst.

However, as Wall Street applauds, others caution against buying for the sake of the bottom line, a strategy that can backfire when cultures clash and clients conflict.

"From World War II to 1990, you didn't have to be anything other than a great ad agency," said John Wren, president-CEO of Omnicom. "[Now] you have an increasingly complicated environment. I suspect the agency world five years from now will only have in it five to six major groups."

David Bell, newly christened chairman-CEO of True North Communications, Chicago, jokingly offered another option: "In five years, there will be only one agency holding company servicing one client. Then the client decides to pull the

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