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Tells Investors It Will Now Owe Almost $400 Million in Payouts

By Published on .

NEW YORK (AdAge.com) -- Omnicom Group faces estimated future payments of nearly $400 million for acquisitions made before 2002, according to financial information released by the agency holding company today.

The payouts on the company's previous acquisitions take the form of "earn-outs," so dubbed as to reflect Omnicom's strategy to pay for acquisitions partly upfront and partly in future years based on the acquired company's performance.

Omnicom estimates it will need to pay out $394.1 million over time, with $376.5 million due through 2005, assuming acquired agencies continue to perform at current levels. The payout is above Omnicom's earlier guidance; the company last month estimated that as of June 1 it owed $250 million to $350 million in earn-outs through 2005.

Investor presentation
In an "investor presentation" released today on its Web site, Omnicom said it has used earn-outs over the past several years for about three-fourths of its acquisitions; it typically pays 30% to 70% of

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the total expected value upfront and pays the remainder of the obligation over three to five years based on the agency's financial performance.

Omnicom also said it's agreed to acquire an additional equity stake in unspecified subsidiary and affiliate agencies for a total current and future obligation of $163 million.

Omnicom reported more detail on how it last year spent a previously disclosed $844.7 million on acquisitions. About half the money -- $433.1 million -- went for new acquisitions. Earn-outs for previous acquisitions accounted for $203.7 million. Of the remaining spending, most of the money -- $182.6 million -- went to acquire additional stakes in agencies in which Omnicom already owned a majority stake.

Press accounts
The disclosures came about a month after Omnicom management vowed to release more information about acquisitions and other financial matters after questions were raised in press coverage about issues including Omnicom's accounting for acquisitions.

Omnicom today closed at $47.56, up $2.78 though less than half of the 52-week peak hit in early March.

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