The answer: No. Not in its current form.
Not that I expect any of these companies to completely unwind in the next year or two. They won't. But don't be at all surprised if Interpublic sheds a few properties beyond the ones already put up for sale. Lord knows there are any number of CEOs of Interpublic operating companies eager to lead management buyouts, as one confessed to me over lunch a few weeks ago. Ad Age's Brad Johnson observed in our March 3 issue that, even if Interpublic doesn't need further asset sales for liquidity, "there is another compelling reason for [new CEO] Bell to sell: to streamline an unwieldy enterprise."
Under cover of "client needs," the world's largest ad agency holding companies went on a dizzying acquisition binge over the last decade, gobbling up everything in their paths until only a handful of independents remained, scattered wildflowers struggling through the asphalt cracks of a sprawling superhighway. The holding companies rationalized consolidation by saying they needed to match clients' bulk. But what they really did was limit marketers' options, and damp the ambitions of entrepreneurs who could no longer compete.
The holding companies also justified acquiring scores of marketing-services companies by predicting they would run counter-cyclical to media advertising, sheltering parent companies and shareholders from ad downturns. That theory was rudely disproved in this economy, with disciplines such as public relations taking severe beatings.
Motivating the relentless consolidation was a need to show top-line growth, which elevated stock prices, through acquisitions, particularly as organic growth slowed. Too many of the deals had little to do with client needs or protection from business cycles, and almost everything to do with Wall Street. "Would they have done this if they were privately held?" Rance Crain, editor in chief of this publication, asked me, rhetorically. Forty-odd years ago, Kenneth Laird of Tatham-Laird predicted, "Some advertising agencies will sell their stock to the investing public." That would be "disastrous," he warned, since agencies would become obsessed with making money rather than ads.
When Interpublic was formed, in January 1961, Marion Harper's goal was to create growth opportunities for agencies stymied by conflict rules. "A bold effort to clear the bottleneck," Ad Age called it then. His secondary aim was to bring such marketing disciplines as research and public relations "out of advertising's shadow."
On both counts, streamlined holding companies-with two agency networks and diversified media and marketing offerings-still make sense. And there are some marketers, mainly with multibillion-dollar budgets, which benefit from holding company solutions. For most, there's little upside-beyond cost savings-to consolidation based on common ownership. No one holding company offers best-in-class service across all disciplines (though Omnicom comes closest), and their operating companies would rather compete than cooperate, hindering the promises of integration.
A better option, one leading global marketer told me recently, would be to "buy a bunch of speedboats and figure out how to wire them up."
The question isn't whether David Bell can fix Interpublic. It's whether any agency holding company CEO is bold enough to fix the model.