After reporting that Omnicom Group's Q2 net income and worldwide revenue both rose 11 percentrelease is here (PDF)the ad holding company's CEO John Wren told listeners to the company's earnings call that the company was finally ready to get serious about acquisitions.
-- Bad economy, better prices: Wren's pronouncement, devoid of specifics as to what areas the company is looking into, raises a question: does he mean it this time? Back in December, he told an audience at the UBS Media Week conference that that was the right time to start moving on some M&A action. According to the transcript on Seeking Alpha, Wren conceded that the company had been "very conservative" in its acquisition strategy.
The company has made at least two small purchases in the past year, in addition to taking a stake in virtual world ad specialist Millions of Us. So while rivals like Publicis Groupe and WPP Group have gone on major spending sprees all over the world, especially in the area of interactive advertising, Omnicom's continued reluctance to join the fray was based on priced remaining too high, Wren said. Perhaps now, as the economy worsens, Wren told investors, "I'm still hopeful though that we'll start to see price income more in line with our historic expectations. Despite our discipline, I guess our acquisitions have been growing at about 1 percent, or thereaboutsa little bit more over the past couple of periods."
-- M&A frenzy has left rivals weakened: So as Omnicom expects to do more deals, its rivals' acquisitive streak has weakened their balance sheets because they "aggressively paid, in our opinion, uneconomic prices." Therefore, they will be hard-pressed to challenge the company for the independents that are still left. Secondly, Wren said another plus of the deteriorating economy is that PE firms who have been blamed for driving up prices now have less interest in acquiring ad firms, leaving more room for ad industry players to maneuver.
By David Kaplan