LONDON (Brand Republic) - The announcement of a series of speedy and swingeing cuts is fast becoming the hallmark of any major acquisition, and the Interpublic Group of Companies’ $2.1bn (£1.47bn) acquisition of True North Communications is no different.
No sooner had the ink dried than Interpublic chairman and CEO John Dooner was revealing that annual cost savings in excess of $25m (£17.49m) had already been identified. There is no news on where they will come, just that they are likely to come soon.
The deal, which will see Interpublic exchange 1.14 shares for each outstanding share of True North, propels Interpublic to the number one spot in world advertising, ahead of WPP Group. It gives Interpublic combined revenues of around $7bn (£4.89bn) compared with WPP''s $6.6bn (£4.61bn).
David Bell, CEO of True North, has been appointed as Interpublic’s new vice-chairman.
True North has effectively been up for sale since November 2000, when its FCB agency lost the winner-takes-all pitch for the $1.5bn-billing DaimlerChrysler account to Omnicom''s BBDO Worldwide. The loss of the account was a severe blow to True North and it was followed by the departure of senior staff.
Bell said, “We said that we were open to strategic possibilities that benefited our clients, our brands and our shareholders. In joining Interpublic, we believe that all three will benefit from becoming part of a top-tier marketing communications company whose size and resources provide new opportunities for each.”
The acquisition has immediately focused attention on the two remaining independent global advertising agency networks: Grey Global, the holding company for Grey Advertising; and Cordiant Communications, which owns Bates Worldwide. Both look increasingly like takeover targets. Havas, having lost out in the race to win Interpublic, is widely seen as a bidder for one of those networks with Cordiant likely as its first target.
Although the Interpublic deal is all but agreed, it is likely to take several months before finalisation. And there is still the question of True North’s largest shareholder to content with -- rival advertising holding company, Publicis.
Publicis holds a block of True North stock as a result of the abortive merger it held with the US company several years ago.
In a statement, the French agency network said that the $2.1bn price tag was at the bottom end of what it thought True North was worth.
True North’s FCB brings with it a number of blue-chip clients including Compaq, AT&T, Coors, Kraft, Nabisco and Quaker.
The deal gives Interpublic the third major agency network it wanted, adding FCB to McCann-Erickson WorldGroup and the Lowe Group. It also gives it the smaller Bozell Group.
In addition, Interpublic now has control of three major media-buying networks in its existing Initiative Media and Universal McCann and, now, True North’s TN Media.
Dooner said, “When people ask me ''why True North?'', it''s simple -- great clients, great people and a shared vision for the future.”