DDB Buys Grupo ABC, Brazil's Biggest Independent Ad Group

ABC Is No. 25 in Ranking of World's Largest Agency Companies

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DDB Worldwide is buying Grupo ABC, Brazil's biggest independent advertising group with more than 2,000 employees, after a relationship that has spanned more than 17 years. The local trade press is estimating the deal at one billion reais in local currency, or about $265 million.

"It's been a dream of ours, and mine, to unite these two businesses together," said Chuck Brymer, CEO of DDB Worldwide, part of Omnicom Group.

DDB first invested in 1997 in a Sao Paulo agency, DM9, started by leading Brazilian adman Nizan Guanaes. Mr. Guanaes and CEO Guga Valente founded the Grupo ABC holding company in 2002, and it has grown to include three of Brazil's 20 biggest ad agencies and PR, digital and promotions and events businesses. The agencies work for many of Brazil's largest marketers, including Anheuser-Busch Inbev, Procter & Gamble, Banco Itau, and Walmart.

Ad Age Datacenter ranked Grupo ABC No. 25 among the world's 50 largest agency companies, with 2014 revenue of $403 million. Ad Age estimated 2014 worldwide revenue for Omnicom's DDB Worldwide Communications Group network at $2.9 billion. Omnicom, the world's second-largest agency company, had 2014 worldwide revenue of $15.3 billion.

Nizan Guanaes (seated) with Africa co-founders
Nizan Guanaes (seated) with Africa co-founders Credit: Mauricio Nahas

One of Grupo ABC's agencies, Africa, started by Mr. Guanaes in 2003 with four partners who had worked together at DM9 DDB, was named Ad Age's International Agency of the Year last year.

Grupo ABC also backed San Francisco-based Pereira & O'Dell as a startup but has been selling its stake to the local partners and will retain a minority share that will pass to DDB.

"We see Brazil as one of the largest marketing communications markets in the world, and see a huge upside despite challenges in the economy," Mr. Brymer said. "We've always looked up to the outstanding creative work at Grupo ABC, in a number of different businesses. And we'll have the passion and energy of Nizan on a full-time basis. He's contagious. We'll want Nizan to play an even greater role with our clients in Brazil, and Latin America and occasionally in the U.S."

Mr. Guanaes' original plan was to take Grupo ABC public on Sao Paulo's stock exchange and become Brazil's first publicly quoted advertising and marketing-services group. But Brazil's economy, including the stock market, is in terrible shape, and going public was no longer a realistic option.

"When the game changes, you have to change your game," Mr. Guanaes said. "This is a fantastic solution. Omnicom is a giant, and this is a world of giants. We keep ABC, but we're powered by a giant."

After all these years, Mr. Guanaes said that he feels at home at DDB. "This will keep our group modern, innovative, and serve our clients with the best technology. In today's environment, you're nothing if you fall behind."

Over the years, Mr. Guanaes, who started as a copywriter, has re-invented himself more than once. At one point, he left for two years to run an internet company. Before that, he masterminded two successful presidential election campaigns for a former Brazilian president, Fernando Henrique Cardoso. Even though he didn't appear to need another ad agency, he started Africa, and it's now Brazil's No. 7 agency, according to local rankings (DM9 DDB is No. 12 and Loducca is No. 18). In a personal re-invention, he lost more than half his body weight a few years ago and became a runner.

DDB expects the deal, which requires regulatory approval in Brazil, to close by the first quarter of 2016, and Mr. Brymer said he anticipates that process will go smoothly. DDB already owned a majority stake in DM9 DDB, and minority stakes in Africa and Loducca.

Although Brazil's economy is troubled, the country's plunging currency makes the deal to acquire 100% of Grupo ABC a less expensive one for DDB and Omnicom.

In April 2013, Kinea Investments, an investment group backed by Itau (one of Brazil's largest banks), paid 170 million reais ($84 million based on the exchange rate at that time) to acquire about a 20% stake in Grupo ABC, implying a value of about $420 million for 100% of Grupo ABC in 2013. At today's exchange rate, that 2013 valuation would translate to about $225 million. Estimates of the value of the DDB deal by the Brazilian trade press are somewhat higher, at about $265 million.

Meio & Mensagem, Ad Age's editorial partner in Brazil, reported that the deal includes Mr. Guanaes and Mr. Valente remaining in charge of the group for at least the next five years.

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