Services: Green Square

Green Square’s Tony Walford examines where things went wrong after the holding company’s 2024 results sent shares sliding. 2024 was something of an annus horribilis for WPP and Mark Read, posting the worst figures of the global groups in marcomms with like-for-like net revenue down 1.0% to £11.4bn in the year. This compares to Publicis leading the pack with 5.8% growth, Omnicom at 5.2% (although pre-pass-through costs), and even struggling IPG managing to grow a little at 0.2%. The only other group to report a revenue reduction was Dentsu, and that was only by 0.1%. WPP’s operating profit margin improved 0.2% to 15.0% due to cost savings and it continued to invest in AI and technology. Staff costs remained constant as a percentage of net revenue, which meant overall there had to have been salary savings – 6,000 staff in fact, around 3,000 in each half year. The January mandate that staff had to return to the office four days per week caused a stir internally but any impact this has had in terms of resignations would not be factored into the staff numbers for 2024. The only WPP region that posted positive growth in 2024 was Western Europe (representing 21% of WPP net revenue) with revenue rising 1.7% as Spain, France and Italy offset a 1% fall in Germany. The UK (14% of net revenue) was down 2.7%, North America (39% of revenue) declined 0.7% and China a whopping 20.8% (most of this in Q4) due to ”client losses and macro pressures impacting media and creative businesses.” The “rest of the world,” representing 26% of net revenue (including China) declined 2.6%, with India, LatAm, Middle East and Africa mitigating some of the Chinese hit. Interestingly, Read singled out TikTok as one of WPP’s fastest-growing trading partners, but I’m not sure this is something I would have championed given the fickle nature of US government sentiment that can turn this platform off at a moment’s notice. WPP’s share price immediately fell 20% on the news but has recovered a little to be 15% down at the time of writing. This is still a massive drop.

What’s gone wrong and how can WPP fix it?

Q4 was particularly miserable with net revenue dropping by 2.3%. Read singled out “project-based work across specialist creative agencies” as the main culprits, mentioning AKQA, Landor and Design Bridge in the Q&A that followed the presentation as being “0.8% of the drag”. Hogarth was flagged as a bright point with growth in “mid-single digits,” but AKQA suffered a fall in the “low double digits”. 2024 saw Ajaz Ahmed, founder of AKQA, and other key players within the agency depart. AKQA was combined with Grey in 2022, then rolled up with JWT, Y&R and Wunderman to form part of VML. A £237m impairment charge (basically writing down the value of agencies on the balance sheet) was taken in 2024, most of which related to AKQA. However, in the post-presentation Q&A, Read stated AKQA had “gained three major clients in 2025 so far and a good client win in VML yesterday”, which was some positive news. Q4 saw the disposal of FGS Global, a significant part of WPP’s PR portfolio. While PR only represents 9% of revenue, it fell 1.7% over the year but tellingly 5.3% in Q4, following the disposal of FGS. At 3% of revenue (one-third of the PR discipline), given bedfellow Burson suffered “mid-single digit decline” (Ogilvy PR wasn’t mentioned), we have to ask how much value WPP places on this element of its offer going forward. Key reasons for 2024 being such a car crash were given as the knock-on effect of client losses in 2023, with one particularly large healthcare client impact. The biggest revenue reductions sector-wise were healthcare (down 7.2%) and retail (down 7.8%). The latter is quite surprising as we at Green Square have seen retail as a strong sector for many of our clients in 2024. That said, WPP saw positive growth in CPG, telecom, media & entertainment, financial services, travel & leisure and even automotive, a sector which has struggled in the last few years. Read also made the point that while revenue overall was down, the top 25 clients grew 2% last year. A huge amount of emphasis was placed on the behemoth that is GroupM which is clearly being seen as the saviour for the group. GroupM represents 40% of WPP net revenue, saw 2024 growth of 2.4% and WPP brought back Brian Lesser in September as CEO (he had previously headed GroupM until 2017 and before that was at WPP’s 24/7 Media). Emphasis was placed on the success of WPP Open (WPP’s AI operating system which integrates all its services, data and tech into one application, enabling clients to see results in real time) and how it helped WPP win major new clients Amazon, J&J, Unilever and Kimberley-Clark. A big chunk of the earnings call presentation was effectively a pitch of what GroupM does and how it’s investing in new leadership, integrating WPP Open and building proprietary data assets through AI to integrate and drive marketing across every channel. This compares favorably to Dentsu’s presentation, which made no mention of AI (apart from what others were doing), instead focusing on turning its decline around through greater efficiencies. The GroupM presentation was impressive stuff, but it’s clear there’s still lots to be done here and Read acknowledged that GroupM’s growth had not been as good as its peers being “around 10% down from where it should be”. Given its prominent position within WPP, we have to ask what WPP would be without it – probably not much!

The outlook for 2025

And what of the outlook for 2025? The forecast is for net revenue to be flat at best but could decline by up to 2%. Apparently, the year has started pretty grimly, with the first two months impacted by global uncertainty making clients cautious to spend, together with the run-off impact of client losses in 2024. We were told it will take a little while for new client wins to ramp up, and that H2 will be where the growth will come (if any). The profit margin is expected to be constant at 15%. On staff retention, this “is not an issue, and we look for other ways aside from remuneration to reward staff.” The indication then is there’s not going to be much in the way of pay rises and, coupled with the revolt against the “four days in the office” mandate, I’m scratching my head as to what these “staff retention incentives” could be. As for M&A, there was little mention of this aside from “adding up to 1% of revenues,” so on £11.4bn, that’s up to £114m more revenue from M&A overall then. Not much in the grand scheme of things, so we shouldn’t expect any seismic deal announcements this year. In sum, WPP appears to be putting everything on red in getting behind GroupM and Open, which may not be a bad shout given the issues it’s having elsewhere. In selling off FGS to KKR (and back in 2019, 60% of Kantar to Bain), we’ve witnessed some key assets being divested under Read’s tenure and I’m wondering if we’ll see a number of smaller disposals over the coming months as WPP continues to focus down on its six agency networks. Mark Read has had a pretty tough ride as CEO, and today’s announcement hasn’t helped. I wish I could say it was a rollercoaster, but there haven’t been many “ups” for the guy. I truly hope 2025 is better than the guidance given today, but pinning it all on a hopeful recovery in the second half doesn’t bode well. Read more    

R/GA has become an independent agency again after 23 years under IPG management. With backing from private equity firm Truelink, it plans to create a new model. Green Square’s Barry Dudley looks at the deal. I met Bob Greenberg around 20 years ago during my time at Naked Communications when we discussed how we may work with R/GA. I’ll never forget the unique nature of their New York offices, rabbit warren like, then opening out into big open-plan spaces with a very clear vibrancy and energy. And Bob struck me as someone who was always looking to the next thing, a mix of genius professor, visionary and quiet taskmaster. Almost certainly a rose-tinted perspective. He is said to have commented, “I believe in reinvention. Every nine years, we reimagine the company.” Whether we are at one of these nine-year points, I’m not sure, but the next reinvention is clearly kicking off. But before looking at this it is worth quickly considering a bit more history. It was founded in 1977 by brothers Robert and Richard, hence the original name R / Greenberg Associates, as a production company specializing in motion graphics and visual effects for film and television. Their work included creating visual effects for movies like Superman, and Alien; designing the iconic title sequence for Ridley Scott’s Blade Runner and developing digital effects for Predator. Through the 1990s and early 2000s, its first reinvention took it into becoming a digital agency focusing on interactive and web-based experiences. It then expanded into interactive advertising and became a leader in integrating technology, data and digital experiences. Then came the natural move into consulting and business transformation. Which brings us to current times and today’s announcement that management and private equity have bought the business out of IPG. So, the next chapter and reinvention begins. R/GA’s press release announcing the deal said: “Creative innovation agency R/GA is proud to announce its return to independence as a privately owned company after 23 years as part of IPG, following a new partnership between R/GA’s global management and private equity firm Truelink Capital.” IPG have been looking to sell Huge and R/GA for some time, with Huge subsequently being acquired by AEA Investors, a ‘global private investment firm’. Whilst there are undoubtedly big differences between Truelink Capital and AEA Investors, they are both private capital businesses. I expect to see plenty more of these sorts of transactions as the big holding company shakeout continues. The release went on to say: “R/GA’s global CEO Robin Forbes and chair and global chief creative officer Tiffany Rolfe are two of the global leaders, together with others, who are investing in the company as part of the deal. R/GA’s next chapter will be fueled out of the gate by a $50M Innovation Fund, enabling the company to invest in new skillsets and talent, and acquire new capabilities, emerging tools and platforms. Additionally, R/GA has established a Strategic Advisory Council of senior marketing and technology executives to support emerging AI client transformation opportunities across multiple sectors.” So, it’s going to have a $50m ‘Innovation Fund’. I really like the sound of these two words, not least because it fits with the R/GA legacy for reinvention. More than ever, businesses have to continually challenge themselves, question whether their offer is still relevant, experiment with new services, and innovate. When did you last work through such things? And who would you do this with – R/GA have a ‘Strategic Advisory Council’. If you don’t have one of those, I’m always around for the price of a coffee… The next paragraph of the press release also throws up some interesting questions: “As an independent company, R/GA is activating an AI-enabled model to better serve clients [Are you genuinely AI-enabled?], unburdened by the restrictions and overheads of traditional corporate structures. New remuneration models based on outcomes [When did you last review your pricing?], agile new team structures, and scaling up its flexible talent model ‘R/GA Associates’, are among the initial changes being implemented [Is your organisational structure fit for the future?].” As you would expect AI is marked out to be key. Luke Myers, co-founder and managing partner at Truelink Capital, said: “We see the growth of AI-enabled experiences playing an increasingly important role in unlocking value in marketing services…” And Tiffany Rolfe said: “At R/GA change is a feature, not a bug, and we believe in the power of brands to transform – which is what we do for clients, and now we’re doing it for ourselves…” I am looking forward to seeing this unfold and to seeing other businesses take similar steps. Read more

The ad industry is reeling from the collapse of the visual effects giant and its advertising arm The Mill. Green Square partner Nick Berry examines how production is changing and what will fill the void. Many people are still reeling from Technicolor’s sudden fall from grace, going into administration with the loss of up to 10,000 jobs across MPC, The Mill and Mikros Animation globally. Some have been quick to note that the signs were clear for all to see, and warnings such as the collapse of Deluxe Entertainment in 2019 should have acted as a wake-up call. But for most people the loss of a pioneering force with an incredible legacy, still working on the biggest movie titles and advertising campaigns in the world, is an unimaginable outcome. Technicolor’s collapse will continue to be examined for some time. It will be correct to cite the massive impact of the pandemic in 2020, followed by the writers’ strike in 2023. But alongside those hammer blows the unprecedented acceleration in technology, automation and the power of the cloud – allowing immediate scalability without huge tech infrastructure – has resulted in the goalposts being uprooted and thrown away, as opposed to simply being moved. Hindsight is a wonderful thing. The strength of the 110-year-old stalwart of the global movie and advertising industry was once its scale of tech infrastructure along with wonderful offices in the best creative hubs in the world. Unfortunately, this legacy technology and physical infrastructure in expensive locations, became antiquated in what seems like the blink of an eye. All of that said, there can be no question as to the creative quality and talent employed across MPC, The Mill and Mikros Animation, each responsible for iconic work and setting the gold standard across entertainment and advertising right up until the end. My thoughts go out to all of those directly impacted as there will inevitably be life-changing ramifications for many people. For Technicolor’s peers there will be an immediate gold rush opportunity. There are massive movie and advertising projects now in limbo with panicked clients needing quick solutions. There will also be an injection of much sought after talent into the market. As the dust settles, however, I would bet my bottom dollar that the energy, creativity and hunger released into the marketplace, not least from those displaced from Technicolor, will result in a new exciting era for the creative production industry, and further market fragmentation seems inevitable. Smaller independent production houses now armed with scalable cloud-based VFX technology pipelines, lower overheads, access to cost-effective global talent networks that can work seamlessly on projects wherever they are in the world, now have a wonderful opportunity to blaze a new trail. I will also bet on there being a surge of new startups from ex-Technicolor staffers, ready, willing, and able to feed on the insatiable desire for content. So, the King is dead, long live the King(s), along with the princesses and princes… The demand for content across the entertainment and marketing sectors is unrelenting, and in industries driven by craft and innovation, change is the only constant. The question is how production houses can maintain workable margins while still prioritizing and safeguarding creativity. Technology and the cloud have gone a long way to leveling the playing field for smaller independent players. Established divisions and snobbery between different forms of production output are being discarded. Many production companies now seamlessly work across different genres of entertainment and advertising as opposed to being pigeonholed. When managed well, this agility can mean added resilience and opportunity. Compared with a decade ago in the advertising world, production studios no longer feel completely subservient to all-powerful agencies of record. Nearly all production houses now confidently call themselves “Creative Production Studios.” They have less fear of the established advertising agencies when approaching brands directly to offer creative ideation and strategy, as opposed to staying downstream in the shallower waters of execution and post-production. Those that don’t change their operating model may well struggle in the brave new world, but the inherent strength of the US entertainment and advertising markets will be fertile ground for existing and new progressive creative production houses to flourish. The same can be said for the UK, where the incredible growth in new studio facilities can’t be ignored. Increased capacity along with unquestionable levels of talent, is leading some to predict that by 2027, once Sunset Waltham Cross studios are fully open, in addition to established facilities at Elstree and Leavesden, Hertfordshire alone will produce more long-form movie content per year than Hollywood. It’s a shame there’s not many hills in Hertfordshire to put a big sign on. So given the demand and foundations exist in the US and UK, the vital factor in shaping the future of creative production across entertainment and advertising is the shift in balance between artist and technology. Technology is clearly now leading the way, with AI at the vanguard. Artists and producer roles must pivot to manage and harness technology to maximize creativity and efficiency, as well as communicating the art of what is possible to clients in a tangible and meaningful way. The creative production studios that crack this code to maintain healthy margins and protect the perceived value of creativity will be the winners. As sad as it is to see the loss of Technicolor and its family of incredible creative studios, I eagerly await an array of new superstar creative production houses stretching the boundaries of visual effects even further, to fill the void left by Technicolor, and our screens with joy and wonder. Read more

After a thumping $1.38bn goodwill write-off, the Japanese holding company presented a frank three-year plan to rebuild its international business. Green Square partner Barry Dudley assesses its chances of success and what it means for Dentsu’s teams around the world. Much like IPG, Dentsu had a tough 2024 in terms of its general trading – organic net revenue fell 0.1%, having fallen 4.9% in 2023. Its operating margin was ahead of expectations, but at 14.8% I would call that pretty ordinary. Hiroshi Igarashi, president and global CEO, Dentsu, said: “The Group FY2024 results were in line with our November guidance with broadly flat organic revenues, and operating margins higher than expectations. We saw sequential quarterly improvement throughout the year, with strong performance in Japan. There were also some notable global new wins in the International business [everything outside Japan].” So, an OK picture. But Igarashi went on to say: “However, we have reported a significant goodwill impairment in the fourth quarter, reflecting a more conservative outlook in EMEA and the Americas. We believe that recognition of these uncertainties will contribute to a sounder balance sheet and a stronger platform upon which to implement the Mid-Term Management Plan announced today.” That goodwill impairment was a lumpy JPY 210.1bn relating to EMEA and the Americas – that’s an eye-watering $1.38bn. There were two headline reasons given: “…a higher discount rate than previously used based on recent market interest rates [going up], secondly conservative reflection of various risks in international businesses.” What sits behind all this? When a business is acquired, very simplistically, the difference between the net assets on its balance sheet and the actual price paid by the acquirer sits on the acquirer’s balance sheet as an intangible asset called goodwill. As most service-based businesses have few “hard assets” (buildings, machinery, IT and the like), the goodwill number is commonly a very big proportion of what is paid by the acquirer. From time to time, the acquirer must review this asset’s carrying value on the balance sheet – is it still worth what they paid for it and is the value still there? If the business is making losses and its future looks tricky then things get harder to justify and some or all of the value may have to be written off. Similarly, if the name of the asset acquired is disappearing, perhaps it is being merged into another business and taking that business’s name – again, is the value still there? I suspect there is a bit of both going on here. As you’d expect, there is a plan. An “MTMP” no less. Igarashi explained: “In our new Mid-Term Management Plan (MTMP), which will run through the years of FY2025 and FY2027, we plan to achieve organic growth of 4% and 16-17% in operating margin in FY2027. We will conduct a thorough review of our core business strengths, be more selective and focused on what we do, and adopt a differentiated strategy to meet our diversifying client needs. “While we will continue to invest in data and technology and our people and culture, we will also invest into areas where we can increase our media capabilities in our key markets. At the same time, we will reevaluate our underperforming businesses and rebuild our business structure. Our ultimate goal is to regain competitiveness and return to a growth trajectory.” I have commented before on the frankness that Dentsu management often use: “Our ultimate goal is to regain competitiveness.” Crikey! Its results were summarized as Japan “performed very well” and the international business was “challenged overall and we are taking this quite seriously.” Got it. And the solution to the seriousness: In 2025, year one of the MTMP, Dentsu will be “focusing on improving profitability through re-evaluating underperforming businesses and rebuilding our business foundation.” During the earnings call there was another piece of frankness from Igarashi when he said that Dentsu didn’t deliver the last MTMP which ended in 2024, which was built on M&A. The new MTMP to 2027 is all about organic growth, with M&A to be “carried out selectively in line with business performance recovery and under strengthened, disciplined management.” The theme continued with a slide saying: “Our position has become increasingly challenging in the face of intensifying competition”, which went on to conclude that Dentsu’s position is “Inferior in terms of network and resource scaling” with “insufficient technology investment.” Then came the inevitable cost reduction plans and the promise of “thoroughly eliminating inefficiencies.” The aim is to reach an operating cost reduction of up to JPY50bn (US$329m) in 2027. The first thing that was mentioned here was to “simplify operations by integrating the Tokyo and London headquarter functions” and then by “redefining the role of regional offices,” in addition to “implementing cost control measures in the markets.” Watch out senior regional management. And what of that pesky AI thing? It was mentioned once in the press release and that was referencing what others are doing in AI. Mentioned the same way in the investor presentation and then just once more within the cost savings: “Extensively automate with AI and systems.” I have a personal affinity to Dentsu which I won’t bore you with. There are many things that make it unique, but I’d say it has a pretty tough time ahead of it – hunkering down and being efficient will only get you so far… Read more

While all eyes are on its impending merger with Omnicom, IPG is still its own business – for now. Barry Dudley delves into its 2024 results to find out what to expect between now and the new holding company empire taking shape. Two weeks ago, we saw some strong 2024 annual results for Publicis and Omnicom with 5.8% and 5.2 % organic growth and 2025 organic growth guidance of 4% to 5% and 3.5% to 4.5% respectively (‘net revenue’ for Publicis, ‘revenue’ for Omnicom). Now we have IPG’s 2024 results and it has had a rather more bumpy ride. Philippe Krakowsky, CEO of IPG, said: “Today we are reporting an organic revenue increase of 20 basis points for the full year 2024, along with adjusted EBITA margin in-line with our forecast of 16.6%. Our strong margin result reflects continued effective operating discipline by our teams, notwithstanding the challenges of the past year. “Solid new business momentum in the fourth quarter and early 2025 will begin to come online later this year, though it will not offset sizable client losses incurred last year due largely to changes in the media trading environment. Factoring in those headwinds, and with the benefit of otherwise sound underlying performance, we are forecasting an organic decrease in revenue for the full year of 1% to 2%.” The “organic revenue increase of 20 basis points” is a somewhat flattering way of saying they grew by just 0.2%. Disappointing for everyone at IPG, there’s no doubt, but given the “sizable client losses incurred last year” I was expecting a much bleaker picture. During the earnings call, Krakowsky said: “…we were on the wrong side of the outcome in defending a number of very significant media accounts … the decisive factor on those largest decisions was principle media, and specifically the commercial terms enabled by principle media at scale.” One of those accounts being Amazon, which IPG had held for many years – WPP and Omnicom shared this prize. That alone would have been bad enough without losing other clients too. The reference to “principle media at scale” and a subsequent comment that “…a competitor was able to leverage its much greater size…” were telling. Even when you’re IPG’s size, you can still be muscled out of business by people even bigger. Scale and price won’t have been the only factors in those pitches, but they matter a lot more in a media pitch than, say, a creative one. But if the sale to Omnicom goes to plan, it will soon be the biggest dog in the neighborhood and will be able to count Amazon as a group client again. I expected profitability to take a hit as well. Rather impressively, IPG delivered an EBITA margin of 16.6% which was in line with forecast. And it has given guidance that it hopes to match this in 2025. Hats off to Krakowsky and CFO Ellen Johnson for marshaling the maths in among this melee of client losses, at the same time as having a coffee or two with Omnicom. And on the math subject, IPG talked through cost-saving and efficiency initiatives with “…in year savings of approximately $250m in 2025” of which there would be “very limited overlap” with the $750m synergy savings that Omnicom referenced could be delivered as a result of acquiring IPG. A shining light, as you might expect, came from Acxiom which “posted good growth for the full year … with four large new business wins across industry sectors”. And another thing that caught my eye was the statement that: “During the quarter, Golin committed to being the first fully AI integrated PR agency by the end of this year.” Can’t wait to see what “fully AI” means, sounds bloody brilliant and at the same time terrifying… But that’s just the world these days. Read more

As advertising’s leaders of the pack report similarly strong 2024 financials, Barry Dudley decodes their earnings calls and explains how their journeys will drastically diverge in 2025. Given its strong performance over the previous three quarters, it probably comes as no surprise to hear that Publicis continued that momentum in Q4. Indeed, it came in ahead of its own guidance. Arthur Sadoun, chairman and CEO, said: “Thanks to a very strong Q4, Publicis became the largest advertising company in the world in 2024. “We are ending the year in the number one position across the board, growing three times faster than our holding company peers, and five times faster than the IT consultancies. We delivered industry-high financial ratios while stepping up the pace of our investments in AI and talent. Once again, we topped the charts in new business rankings. “But even more importantly, we are accelerating on our status as a Category of One thanks to our unmatched 1st-party data capabilities, our connected media ecosystem, our creative firepower, and our 25,000 engineers, brought together through the Power of One. This makes us confident in significantly outperforming the industry in 2025 for the sixth year in a row.” The key numbers for the year to December 31, 2024: net revenue of €14bn, 5.8% organic net revenue growth, with operating profit of $2.5bn at a margin of 18%. That margin is impressive. Very impressive in fact, given its sheer scale, levels of infrastructure, the investments it’s making in its people, data, AI, technology, the list goes on. So, for those young, fleet-of-foot, dynamic independents out there an 18% margin must be a walk in the park to achieve – are you? Sadoun went on to set out what he sees as the unique competitive advantages that have put Publicis in the “number one” spot:

• “Leadership in first-party and proprietary data”“Thanks to AI we connect this data to our entire media ecosystem and intelligent creativity”
• “Thanks to AI we connect this data to our entire media ecosystem and intelligent creativity”
• “We have 25,000 engineers and consultants … to make sure our clients can integrate those capabilities into their own environments and transform their business model”
• “We operate as an efficient and flexible single platform organization thanks to the Power of One, Marcel and our Country Model to make all of this data and technology seamlessly accessible to all off our clients and teams”

A pretty powerful framework. if you head up to 30,000 feet, what is your equivalent articulation of your competitive advantage(s)? Part of what has driven Publicis, for decades now, has been chasing down the biggest in the pack – WPP. Having an enemy, a Goliath to your David, is very commonly what drives people, drives businesses. This has been the environment that Publicis has been playing within, evolving, looking for new angles, markets, advantages. Now it is the Goliath, or perhaps it’s Leo the Lion. So what’s the goal now? Well, assuming that regulatory hurdles don’t trip up the Omnicom takeover of Interpublic, Publicis shifts back to number two (in terms of revenues). Sadoun is already relishing the hunt for the new Goliath – “this puts Publicis back into the challenger position, which is where we like to be.” But he’s not rushing around trying to find a big lump to quickly fatten the numbers. Instead, Publicis is pointing to its €800m to €900m acquisition budget for ‘bolt ons’. This means buying strategically to enhance what it already has, to bolt things on to existing operations in some very specific areas: first-party data, production, digital media, technology – quite a spectrum. And Sadoun isn’t about to put a banana skin in front of himself at the start of the year – his outlook is for 4% to 5% organic net revenue growth, which is slightly down on 2024. I’d bet on Publicis beating this range, but this old adage still works – under-promise, over-deliver! Later the same day Omnicom’s results landed. It also had a strong year with $15.7bn of revenues, with organic growth of 5.2% over 2023 (the Publicis numbers above were on net revenue, so not quite apples and apples), and an EBITA margin of 15.5% (again not quite a comparison to Publicis – EBITA v operating margin). And the guidance for 2025 sounded familiar at 3.5% to 4.5% organic growth – under-promise, over-deliver. John Wren, chairman and CEO, said: “From this position of strength, we are incredibly well prepared for and excited about the complementary combination of businesses and cultures with our proposed acquisition of Interpublic. Together, clients and employees will benefit from expanded products to deliver superior creativity, innovation and effectiveness. We will also bring together unparalleled data assets to market, fueling leading creative, produced at scale, and activated by the world’s top-ranked media practice to drive measurable sales. We see significant upside potential through expected revenue and cost synergies that can drive growth beyond what Omnicom was delivering alone.” There were winners and losers across the different service lines and also by geography, but for me there were more interesting things that emerged. During the results webcast, Wren unsurprisingly spent most of his time on the Interpublic takeover, a big part of which was around the $750m of annual cost synergies that it is expecting to achieve if the deal goes through. And he sees more synergies on top of these through revenue opportunities, leveraging near and offshore capabilities and utilizing automation, including AI. Wren was keen to make clear that headcount savings “will not impact employees dedicated to servicing our clients and generating revenues.” I can imagine quite a few people trying to work out whether they fit into this definition… And where there is duplication or for people who aren’t ‘dedicated to servicing our clients and generating revenues,’ they will choose “the best individuals across the organization, irrespective of their current affiliation.” These are going to be very uncertain times for people, which will be one of the biggest challenges in the coming months. Shareholder approval is set for March 18, but the deal won’t close until the second half of 2025. Until then, Wren said that they will “continue to operate as independent businesses.” This is one hell of a lot of internal work, spreadsheets, integration planning, legal loopholes to crack. All while Publicis is practicing with its sling to take aim at the coming Goliath. Read more

From Getty acquiring Shutterstock to Bauer buying Clear Channel and Publicis bringing together Leo Burnett Global and Publicis Worldwide, it’s been a busy start to the year for M&A. Green Square’s Tony Walford tells us what to expect in the weeks and months ahead. What a start to 2025! Trump back in, economic and political turmoil in the UK, France and Germany and the Middle East (but hopefully now resolved) and Russia-Ukraine continuing to present challenges, albeit Trump reckons he can fix the latter in a stroke. Given this background, it’s understandable to anticipate a slowdown in investment and M&A whilst people wait to see what the US administration will bring and also how the UK economy pans out. That said, hot on the heels of the Omnicom-IPG announcement at the very back end of 2024, this year started with a couple of significant acquisitions. Getty is acquiring Shutterstock in a merger that will value the combined company at $3.7bn and Bauer is buying Clear Channel Europe-North for $625m. Given current global macroeconomic uncertainty, the question is whether the nature of these three deals points to a potential trend in M&A for the coming year. While trying to predict this year’s theme so early on would only set me up to look a fool (no comments please), there is a common thread across these three transactions, which is consolidation. And as I write, the news of Leo Burnett and Publicis Worldwide coming together under the name Leo is reverberating – it’s not M&A, but it’s certainly consolidation. There’s been plenty of press comment around Omnicom-IPG and its proposed restructuring, so there’s no need to repeat that here. That’s consolidation in its purest form in an increasingly competitive and changing market… two legacy global networks huddling together to keep warm, cutting costs and aiming to knock Publicis off its recently claimed position as ‘Top Dog’ (while the Top Dog itself begins internal huddling together under Leo). So, let’s concentrate on the Getty and Bauer deals. First, Getty-Shutterstock is about controlling more of an already declining image market, protecting its position through cutting costs (estimated annual savings are up to $200m after three years) and facing up to the threat that AI image generation brings. The combined entity will control nearly half of the global image market with a massive library of approximately one billion stock images, videos, GIFs and the like. Image prices are being driven down, photographers are (sadly) being paid less and the market has become commoditised. On the face of it, this replicates the Kwik-Save store mentality of the 1980s, “pile it high and sell it cheap,” but generative AI tools, such as Midjourney and OpenAI’s Dall-E, are major threats to the traditional image market. Getty is not only trying to consolidate its position as the place to go by offering a broader and deeper content library, but wants to outpace competitors by developing its own AI-powered tools for image search, editing and generation. It hopes that its vast, merged combined repository will provide the biggest pool in the world to train its machine learning tools on. In comparison, while Bauer-Clear Channel is also about consolidating across media platforms, it’s not simply about size, market share and defensiveness. Bauer has a suite of media assets in magazines, including Grazia and Heat, and radio with Absolute, Magic and Kiss to name just a few. By adding out-of-home it significantly extends its offering to advertisers and the opportunity to seamlessly sell media across a broader set of formats. It’s interesting that in buying the North European elements of Clear Channel, Bauer has stuck to its local markets – those which it understands. It already operates in 7 of the 12 markets Clear Channel brings, so there’s a degree of risk mitigation, which brings me on to another point – trust. Trust in news media is being eroded. There’s a constant onslaught of political influence across the various news platforms, some much more biased than others. Not to mention Elon Musk using his own platform, X, to have a pop at the UK’s Labour government as well as Nigel Farage (who must be particularly sore, given his prior constant praise for the guy). With polar-opposite opinions and spins being put on our ‘news’, and out-of-context comments and fake imagery being broadcast globally, people no longer know what to believe. The cancel culture still exists, but people are becoming a bit more suspicious of the information that’s being doled out and less knee-jerky before making a decision. And if the public is trusting news media less and less, how does this translate into the trust people place in those brands that advertise on it? One of our Green Square client alumni, Jack Horner (formerly of FRUKT, which Green Square sold to IPG, and now a founder of local media specialist, Nearfield), suggests local media news is considered far more authentic. While it tends to be “local news for local people,” the proximity of the matters being reported means it’s far more likely that fake news will be called out and local news platforms are hugely at risk should they lose trust. When something major happens locally, for example the dreadful fires in California, I can’t imagine residents would choose CNN or Fox over the Los Angeles Times to get a more detailed picture of what is happening. In turn, this trust in local media can extend to advertisers. We all know brands must earn trust, but being seen in a place where authenticity already exists is a good start. It could be deemed smart to shift a more sizable element of advertising and events budgets to regional media outlets, allowing brands to connect and engage with local communities, in turn garnering more trust, loyalty and ultimately becoming part of their ecosystem. Out-of-home, or local radio, seem pretty smart places to be. Another fear for brands is one where their adverts appear next to inappropriate or extreme content. In a world where media trust is diminishing, has this risk shifted to brands potentially being seen as inauthentic depending on their media placement? Again, out-of-home, or local radio seem pretty smart places to be… As an aside, the LA Times is owned by billionaire entrepreneur Patrick Soon-Shiong, who also owns the San Diego Union Tribune and other California news outlets. He acquired them with the specific intention of bringing more “fair and balanced” news, representing all views and, in late 2024, he controversially prevented the paper endorsing a single election candidate (in this case, Kamala Harris). He also fired the entire board in his ongoing quest to “restore balance.” Whichever way you look at it, given the size of the readership, this is local media at scale. Coming back to the outlook for 2025, while in tricky times we tend to see consolidation, my wish-list for this year includes it being about restoring trust, particularly in media content. The purpose, ESG and diversity agendas have rightly had most prominence in recent times, but what use is purpose without trust? It will be a shame if this year ends up being mostly about consolidation in an increasingly unstable world. M&A should be all about gaining complementary skills and services, which improve and extend client offerings, not just offering more of the same. That’s boring. Bigger isn’t better. Better is better, and the best acquisitions are those that augment people’s lives in some way. I’d like to think as we specifically look toward content that shapes so much of our day-to-day decision making, trust and authenticity will be higher on the agenda when looking at M&A. Read more

Discussing the evolution of the business since its merging with the global consultancy, chief executive Chris Mellish outlines why Unlimited is only just getting started. UNLIMITED is riding the crest of a wave right now, and there are no signs of that slowing down anytime soon. The business has just picked up the McDonald’s customer relationship management account for the UK and Ireland, continuing a hot streak on the new business front. The group consists of integrated creative agency TMW, Walnut, UNLIMITED’s market research agency, B2B communications and content marketing agency, Nelson Bostock, and healthcare comms agency Health Unlimited. UNLIMITED is being integrated to scale Accenture Song’s Al abilities and underline its evolving creative credentials. Until early this year, a case could be made for the group being unintentionally one of the best-kept secrets in the advertising community despite it being 38 years old, employing over 600 people, winning numerous awards and working for clients such as the Cabinet Office, Canon and Vodafone. Last year, TMW alone won 24 pitches, totaling £7.9 million in new revenue, including Suzuki, Oak Furnitureland, People’s Postcode Lottery and Rail Delivery Group. But in April, things certainly changed when the group was acquired by one of the world’s largest business consultancies, Accenture, to become part of its creative arm, Accenture Song, which has heightened its new business pipeline even further due to its substantially strengthened offer. Tony Walford, founder of Green Square which handles mergers and acquisitions, describes the deal as having “a smart rationale” that will bring “specialist elements to Accenture Song’s broader offer.” Now, the group sits proudly alongside major agency names such as Droga5. Within just six months the acquisition has already begun to bear fruit having just won McDonald’s CRM account, something it would have been unlikely to have achieved without the collective might of its new parent company. Michelle Graham-Clare, CMO UK and Ireland for McDonald’s UK and Ireland says of the hire: “TMW demonstrated a true passion for our brand. Their use of customer data, strategic thinking, as well as creativity was exceptional and we look forward to utilising this partnership as a way to build world-class CRM that delights our customers at every touchpoint.”

Ambitious Leadership

Chris Mellish, group chief executive of UNLIMITED, sees the move as part of the leadership team’s collective drive to take on the traditional agency networks from which many of them have heralded. Mellish, who always comes across as a calm and approachable leader, has a great ambition for UNLIMITED’s progress. A former president of BIMA, Mellish has spent more than two decades developing digital marketing solutions. He joined the business in 2019 from Razorfish where he spent 14 years, to become the chief executive of TMW before being promoted to lead UNLIMITED last year. UNLIMITED has a clear point of difference, he believes, through its modern integrated offer alongside its deeper understanding of consumers through behavioural and neuroscience as part of its Human Understanding Lab launched in 2022. “Five years ago, we made the decision to put PhD-level thinking at the heart of everything we do and combine that with our unique perspective on integrating the customer journey. It’s really struck a chord with the market and we’ve seen an incredible period of growth.” That has been exemplified in Accenture Song being named on McDonald’s CRM Agency Roster, with TMW leading the pitch in the UK and Ireland, subsequently becoming the first agency appointed as part of the global roster review. Accenture offered scale and expertise to support the process, but TMW led on both creative and strategy. Mellish explains that the proposition around “true integration” was something he held a strong belief in when it came to delivering stronger customer engagement calendars “more inspiring” and integrated campaigns “more effective” for clients. Now, he feels that is self- evident following the positive response by the McDonald’s team. “This was our first opportunity to pitch alongside the rest of the Accenture Song, and it has demonstrated immediately the scale and potency that we have added to each other’s offerings,” he continues.

Break On Through

Debut campaigns for new clients have been released in recent months, showcasing an evolution in strength. That included TMW’s first work for Suzuki offering a very different type of car ad. Its campaign was designed to help the Suzuki Swift stand out against ‘increasingly formulaic ads’, presenting the different lengths that owners would go to just to keep the car from growing in popularity. The creative agency also supported the launch of on demand TV service Freely, from BBC, ITV, Channel 4, and Channel 5 and the “Enhance Performance, Legally” campaign for sports nutrition brand Bulk which proved deliberately provocative. Elsewhere, through its long-standing consortium with Pablo, the first campaign was released to help ‘humanise’ HMRC under the ‘You’re On It’ platform. Released in November, it highlights the British tax authority’s ambition to increase the number of users of its app to six million people. That consortium was also appointed to take on the Government’s key climate account earlier this year. Described as “The Breakthrough Agenda” it saw UNLIMITED beat out rostered agencies on the Government communications framework to be appointed as the agency of record for The Department for Energy Security and Net Zero‘s initiative, which aims to strengthen international collaborations around clean technology development and sustainable solutions. The brief includes website design and development, social strategy, and content creation and PR around key periods, managed by bespoke specialists across the network agencies, including TMWX, TMW Tomorrow and Nelson Bostock. Mellish believes that clients have bought into how it helps brands manage their communications efficiently and effectively through a simple ‘honed down’ approach that they understand, while the positive culture around the business that talked about driving performance and effectiveness also resonated. And now his challenge is to integrate that all within Accenture Song while building scale, without losing those core, appealing strengths. “Together, we are building a new agency model that enhances our ability to deliver comprehensive, elevated solutions that better serve our client’s evolving needs,” he states enthusiastically.” Mellish is relishing taking the offer and working alongside the established parts of Accenture Song to move beyond its UK-centric footprint and build further. He describes the breadth of the business as “enormous” – a word he also uses to describe the new opportunities. With Accenture’s backing, UNLIMITED has also considerably strengthened its technological capabilities. “The most topical example is probably AI, where billions are being invested, and the breadth and depth of expertise throughout Accenture is incredible. Since becoming part of Song, we’re now lucky to have access to world-leading experts across every specialism or technology you could ever think of.” Subsequently, Mellish is now part of the Accenture Song leadership team reporting into Sohel Aziz, the managing director for UK, Ireland and Africa.

Clear Signs Of Progress

The McDonald’s win is a clear sign of UNLIMITED’s progress as it competes for what Mellish sees as being “more innovative briefs” with the Accenture Song fold. He sees bigger brands and a bigger scale prove exciting for the team, with early evidence that the mix is working. “We’ve had a huge wave of success over the past few years, but we’re now working on certain briefs that we simply wouldn’t have seen before. It’s exciting thar our big ambitions have started to become reality almost immediately. McDonald’s is the perfect case in point. The response from staff has been amazing – our employee engagement numbers have got even better this year.” Speaking to Creative Salon when the acquisition was announced in April, Dame Annette King said that UNLIMITED had proven in recent years to be “one of the industry’s strongest offerings across the board.” She continues: “Their capabilities and expertise have driven incredible performance for their clients – all of which has been underpinned by a culture where people genuinely love where they work and are proud of the work they put out in the world. Their unique skill sets are complementary to what we already have at Song but what was evident from the outset was how these could be supercharged by what we do. Particularly when it comes to our Gen Al offering that we know is a central focus for clients everywhere.” Moving forward, Mellish intends to ensure that more brands experience the capabilities of the group. “We’ve already built an approach that drives both great creativity and real business results for our clients. With this bigger platform, I’m excited that many more brands will get the opportunity to see that firsthand.”  

2024 was bookended by two Omnicom deals – Flywheel in January and Interpublic in December – which got us all excited. Green Square’s Tony Walford explains why he expects a lot more M&A excitement in 2025. It’s been a relatively slow couple of years for M&A globally, with the UK and North America displaying a general trend of decline from the peak levels seen in 2021. That said, there’s lots to be positive about as we enter 2025. First, why the decline? In a nutshell, economic and geopolitical uncertainty. Inflation increased globally from late 2021 and continued to persistently rise and remained high (above 5% in the case of the UK) until recently. Central banks hiked interest rates to bring inflation back under control, leading to increased cost of debt, which the majority of acquirers rely on to finance transactions. Couple this fundamental financing stranglehold with major global conflicts, fears of a global recession, 2024 elections in the UK and the US, and an indication from the new UK chancellor that Capital Gains Tax (CGT) rates would dramatically increase, and you have the perfect storm. Buyers became more selective and offered lower valuations, with sellers reluctant to accept these valuations, particularly given CGT fears at the time. Whilst we saw a flurry of UK transactions closing prior to the budget, and some that missed the deadline completing shortly after, there has still been a significant reduction in deal volumes over the last couple of years.

Falling inflation and interest rates

So, what about M&A in 2025? The consensus view, supported by us at Green Square, is we’re in for a very busy year as we see the factors that drove the reduction in activity start to reverse. Most notably, inflation has reduced and thus interest rates are slowly coming down and this is expected to continue into 2025. Putting aside growth and political issues in France and Germany, the UK and US are seeing some recovery and economic optimism is improving, even though we are yet to see what the second Trump administration will do. Private Equity is sitting on a lot of cash which it needs to either deploy or give back to investors, with spending clearly being their preference. On top of this, PE firms typically hold investments for 3-5 years and, due to the relative lack of activity over the last couple of years, many are holding investments at the latter end of this timeline which they need to offload. Thus, we can expect to see plenty of PE disposals in the coming year. Then there are those agencies that wanted to sell in 2024 but decided to hold off for all the reasons stated above. Time waits for no one and, with the increase in UK CGT being lower than expected (at least for the time being), there’s a lot of pent-up shareholders looking to realize value. Put all this together and you have funding costs coming down, more businesses coming to market and the gap between buyer pricing and seller expectations narrowing. Hence our forward-looking positivity. In terms of our marketing services universe, we saw a diverse crowd of acquirers in 2024 with PE-backed outfits tending to be the most prevalent. The global networks were fairly quiet, focussing on infills where they lacked a specific skillset rather than statement transactions, aside from the just-announced Omnicom IPG, Valtech buying Kin+Carta, Publicis acquiring commerce specialist, Mars United, and LDC-backed MSQ doubling its presence in the US with SPCSHP. Management consultancies were also relatively inactive, with the exception of Accenture buying Unlimited.

Key M&A areas in 2024

Whilst the market was somewhat muted, certain marketing specialisms saw greater M&A activity in 2024, with key areas of interest as follows: PR. This was possibly the most active discipline for acquisitions with a mix of consolidation, disposals, MBO’s and new entrants. We saw WPP merge its Hill & Knowlton and BCW agencies to create Burson, whilst offloading its majority stake in FGS Global in a $1.7bn deal to KKR. Publicis acquired Influential, the world’s largest Influencer agency, whilst Havas also got in on the act buying the somewhat smaller Wilderness. Bully Pulpit (BPI) was a new entrant to the UK market, acquiring Seven Hills and Message House, making the UK BPI’s biggest European market and next largest outside the US and Public Affairs holding company PPHC bought UK government relations firm, Pagefield, another first step for a US firm into the UK. Healthcare marketing transactions didn’t disappoint and, despite some big pharma woes resulting in less marketing spend, transaction activity remained strong. This was primarily across the more scientific areas of market access and regulatory compliance, with PE-backed Clinigen acquiring Ascencian and Kinesys, but momentum remained across the more general medical branding and communications spectrum with some decent-sized transactions, such as IQVIA acquiring Ceuta, together with many smaller agencies including BioStrata and AKT also realizing value. Digital, as always, was another key area, the most notable deal being PE outfit ECI buying Croud from LDC, but we also saw MSQ buy 350-person German CX agency UDG. As expected, AI is fast becoming the hottest area with US digital engineering and AI enabler EPAM acquiring First Derivative, Blackstone-backed HH Global buying Northell Partners and Healthcare specialist Real Chemistry buying Avant for its AI-driven insights and marketing expertise. There were also many transactions across Social, Data analytics, Performance and e-commerce, all areas which continue to be in high demand. Events and Experiential has seen a significant bounceback over the last couple of years post-COVID as the smarter players shifted their proposition to digital alongside physical engagement during that period. There’s been high interest in areas which involve people interaction as brands strive to get ever closer to their consumers, be it B2B, B2C or D2C. 2024 saw PE-backed ImpactXM buy Matrex in the US and reach out to the UK for the first time in acquiring Enigma. This is a buyer to watch in the Experiential space as it looks to build out from its North American heartland. Stagwell continued its acquisition march, augmenting its experiential positioning in buying Sidekick (a Green Square transaction), and UK-based major Experiential independent, DRPG, bought North Carolina’s Special Events. Retail, e-commerce and Shopper has also had a resurgence, as indicated by the Publicis Mars deal mentioned earlier. We saw Acosta buying Dee Set, Product Connections and Crossmark, and Quad entering the In-store retail media market with its acquisition of DART. French Retail Marketing specialist, Altavia, expanded its overseas offering with acquisitions in Casablanca (D-Aim) and Singapore (ielo design). Read more