By Published on .

The gyrations of the stock market may have given pause to most public companies, but won't derail ad agency deals, industry executives said.

Analysts and agency heads said the market volatility won't affect acquisitions and initial public offerings planned for the coming months. Most pending deals are not dependent on daily changes in share prices, they said.

"I can't see that there would be any change" in such transactions as the Cordiant split up, the planned Young & Rubicam IPO and the acquisition of Bozell, Jacobs, Kenyon & Eckhardt by True North Communications, said analyst James Dougherty of Prudential Securities.

"This too shall pass," said Philip H. Geier Jr., chairman-CEO of Interpublic Group of Cos., New York, of last week's stock swings.

Bates Worldwide, soon to be known as Cordiant Communications Group, is rumored to be an Interpublic takeover target once its separation from Saatchi & Saatchi Worldwide is completed, though executives from both companies deny the speculation.

Cordiant PLC CEO Bob Seelert-who will become CEO of spinoff Saatchi & Saatchi PLC on Dec. 15-seconded Mr. Geier's opinions on the stock market.

"There is no effect on this agency," said Mr. Seelert, "and there will be no effect down the line with the demerger."

He said he does not believe the wavering stock market will make Saatchi & Saatchi a takeover target, a sentiment echoed by Michael Bungey, CEO of what will become Cordiant Communications Group after the split.

The initial price of the Cordiant Communications Group stock should fare no worse than the market as a whole at the start of trading, said Mr. Bungey.

"Our best [takeover] defense is performance," he added.


Cordiant Communications Group stock will find its own level based on Bates' performance, said Gregory Smith, managing director of investment banker AdMedia Partners. He added that the stock may even get a boost from speculative buyers banking on a possible takeover.

The BJK&E sale, estimated to be worth around $440 million in True North stock, should also be finalized as expected in December, said observers. True North's stock has not been beaten down in the market upheaval; if it had, the deal would have provisions for such an event, Mr. Smith said.

True North CEO "Bruce Mason and [BJK&E CEO] Chuck Peebler have to have a conversation based on stock price, but True North's price is within 10% of where it was, so it's going to be a short conversation," said Alan Gottesman, managing director of consultancy West End Communications.


Y&R is not likely to stop its IPO plans but it can delay them if the market seems too weak, said Mr. Gottesman.

Last month, Y&R appointed Bear, Stearns & Co. and Donaldson, Lufkin & Jenrette as lead underwriters for its IPO, with Goldman Sachs & Co., Furman Selz and Smith Barney also participating.

The company is expected to file for an IPO as early as the first quarter.

A company in an IPO needs confidence the market will support its initial price, said Mr. Gottesman. But he added that Y&R won't be going to the market for a while, giving stocks generally time to settle down.

Looking further ahead, large, acquisitive agency holding companies-including WPP Group and Interpublic-did not get hit as severely as other industries, so the market drop should have little effect on their future deals.


John Wren, chairman of Omnicom Group, New York, noted that agency stocks have a price-earnings ratio in the mid-20s-to-1 range, making stock a good currency for deals.

If a company felt the stock was undervalued, it would be less inclined to use it for deals, he said. In that case, most holding companies have adequate cash reserves they can tap for acquisitions, said Mr. Smith.

Most Popular
In this article: