Updated: What's Ahead for WPP
By Steve Mcclellan
NEW YORK When it completes its acquisition of Taylor Nelson Sofres later this month or in early November, WPP Group will become the number-one ad agency holding company, based on revenue. Omnicom Group will slip to number two.
Based on full-year pro forma 2007 figures, the combined WPP-TNS revenue total is approximately $14 billion, per WPP's calculations, compared to Omnicom's reported full year 2007 revenue of $12.7 billion. Excluding TNS, WPP reported revenue in 2007 of $12.4 billion.
When the deal is completed, TNS will remain a distinct and separate brand, WPP says, but one managed within WPP's research arm, the Kantar Group, headed by Kantar chairman and CEO Eric Salama.
Other significant changes are planned for TNS. Some layoffs appear to be inevitable as WPP seeks to capture close to $100 million in annual savings by consolidating some overlapping operations between Kantar and TNS, including the consolidation of the various consumer panels each company maintains to conduct research.
WPP's merger documents note that cost savings can be achieved through the consolidation of "comparable operations, processes and procedures within TNS and those of WPP's own operations." A WPP rep said last week that company executives would not comment further until the merger is completed.
Certain businesses will also be spun off as a result of regulatory rulings by the European Union, which approved the transaction on the condition that WPP sell its TV audience measurement service in Europe and its market research business in Ireland. Australian authorities also ruled that WPP must dispose of either its own TV ratings service there or the ratings service owned by TNS.
The TNS acquisition will enable WPP to become significantly less reliant on ad-related businesses, which could help the holding company to better weather the economic downturn. A WPP rep confirmed that once the deal for TNS goes through, its ad businesses would contribute just 40 percent to the holding company's revenue, while marketing services will contribute 60 percent. The current mix is 46 percent and 54 percent, respectively.
About six weeks ago, when GfK formally withdrew from the bidding process for TNS, WPP became the sole bidder for the company having made a hostile takeover proposal to TNS shareholders in July. Previously, company management had repeatedly rebuffed it.
With no white knight in the offing, TNS shareholders had to decide whether their long-term interests would be better served by supporting their current management and remaining independent or by selling to WPP.
By last week the verdict was in: 82 percent of TNS shareholders opted to sell to WPP. After months of rejecting the WPP offer, TNS management, led by CEO Donald Brydon, capitulated and indicated that even TNS board members would be tendering their shares for the mix of cash and stock that WPP was offering. It remains to be seen how much of the TNS senior team makes the transition to WPP. Brydon himself has said he hasn't been offered a job and doesn't think he will be. Given some of the acrimonious back and forth that occurred between the two sides as the acquisition played out, few who have followed the process doubt his instincts.
This updated story corrects combined WPP /TNS revenue for 2007 and reports that WPP would become the top holding company based on revenue. Also Brydon's title is chairman not CEO.
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