The biggest ad-industry deal since WPP Group bought Grey Global Group in 2005 will improve Publicis' nontraditional marketing capabilities at a time when consumers are spending more time on the internet and TV advertising's effectiveness is being called into question. It will also provide Paris-based Publicis with a stronger U.S. foothold.
Digitas, with $350.4 million in worldwide revenue last year, is the fourth-largest marketing-services agency in the U.S. and the third-largest interactive agency, according to Advertising Age's rankings. Post-acquisition, 34% of the group's revenue will come from digital and marketing services as opposed to 28% now.
For Digitas, the decision to sell was driven by the need to achieve media-buying scale with the few giant online-media sellers, such as Google. "Neither Digitas nor anyone else was that big a part of their revenue," said David Kenny, chairman-CEO of Digitas.
The roots of the deal run deep. One of Mr. Kenny's first ad jobs was working on Oldsmobile, which employed Publicis' Leo Burnett as its agency. On that team were Jack Klues, now head of Publicis Groupe Media, and Roger Haupt, who in recent years urged Chairman-CEO Maurice Levy to consider buying Digitas.
Messrs. Levy and Kenny didn't meet until early in 2006, when the two had a quiet dinner after a session at the Harvard Business School, where Mr. Levy sat in on a class as students discussed Publicis. Mr. Kenny, 45, came away unconvinced that he needed to sell.
The year turned out to be something of a roller coaster. Digitas' shares were battered this summer amid an untrue rumor that American Express was putting a large chunk of its business into review, as well as the disclosure that a few major clients had fled its Chicago office. Throughout the tumult, he was approached again and again by Mr. Levy.
"When Maurice first came to dinner, I didn't necessarily think that was the way to get scale," Mr. Kenny said, but "I did like the cultures of Publicis agencies enough to take second and third meetings."