Just six years ago, Americans referred to the unbundling of the full-service agency and the giant media specialists it spawned as the European Disease. Failure was forecast for the first of the new breed to migrate to the U.S., such as Zenith Media.
Today, the world's leading communications companies are cobbling together ever-bigger combinations of the media specialist brands they have assembled to oversee billions of dollars in media buys. That trend was accelerated last week by French holding companies Havas Advertising and Publicis Groupe. But the former's bid to acquire Tempus Group still faces the threat of a rival bid from WPP Group Chief Executive Martin Sorrell.
"Our ambition was to narrow the gap between the top three and us," said Havas Chairman-CEO Alain de Pouzilhac, explaining the $600 million offer to acquire London-based Tempus, parent of media independent CIA.
If the deal is completed, CIA would be merged with Havas' Media Planning Group to create the world's fourth-largest media specialist brand. The top three are Omnicom Group's OMD Worldwide, WPP Group's MindShare and Interpublic Group of Co.'s Universal. In the U.S., a market that accounts for 44% of worldwide ad spending, the combined CIA Media Planning shop would rank eighth.
Also last week, Publicis and Cordiant Communications Group announced the long anticipated formation of a holding company to house Optimedia-which had been wholly owned by Publicis-and Zenith Media, which had been jointly held by the two companies. Publicis will hold 75% of the new company, to Cordiant's 25%. The media brands will be kept separate, but the holding company is likely to leverage its size to negotiate better media rates.
The outstanding question is whether Mr. Sorrell will agree to sell WPP's 22% stake in Tempus for an estimated $70 million profit, or make a counter bid. Havas agreed to pay a premium for Tempus specifically to discourage the acquisitive Mr. Sorrell from bidding. After the bid document is issued, WPP will have three weeks to decide whether to make its own offer.
The company has already asked Tempus to supply the information it provided to Havas. Tempus's share price rose by more than 50% after the Havas bid.
With little left to buy, new combinations of existing brands are adding clout at the holding company level. In addition to the Publicis-Cordiant joint venture, Interpublic Group of Cos. has unveiled Magna Global, which will negotiate rates on behalf of Interpublic's Universal McCann, Initiative Media and TN Media. WPP Group is also looking to set up a media holding company to oversee its MindShare and Media Edge, which would continue as separate brands.
"There's a remorseless push," said Zenith Chairman John Perriss. "Clients want better value, the best talent, more resources and research, for less remuneration. People need greater scale to squeeze out those economies."
The Havas-CIA deal also fills in geographic gaps. Media Planning Group has never entered Asia, and CIA is tiny in the U.S. and absent from Latin America.
"Client request for global [coverage] has really just accelerated in the last two years," said Tempus Chairman Chris Ingram.
Contributing: Mercedes M. Cardona