Publicis is the world’s third largest advertising agency and is now set on buying the US based digital ad agency Sapient for $3.7 billion. The French company is hoping to extend into North America and Internet-based advertising in order to match fierce competitors WWP and Interpublic. The move was made following Publicis’ low growth after a failed merger with Omnicom, the world’s second largest advertising agency. Publicis hopes the purchase will put the company back on track.
Some analysts are concerned the deal may set Publicis back further than the company can handle. Investors are not likely to see a cash return anytime soon and analysts worry the company may have reached a ceiling as far as growth is concerned. Publicis shares fell 2.3 percent in afternoon trading, after news of the purchase. Sapient, on the other hand, rose by 42 percent. Pubilicis’ Chief executive Maurice Levy is confident the buy will be exceedingly valuable in the long run.
This operation is extremely important for securing the future of Publicis,” Levy said. “It is far better to invest and deliver a higher growth and higher profits … which will lead to a re-rating, rather than simply buy back our own shares.”
Sapient’s sales growth in the last year has exceeded the sales of Pubilicis with the US based company recording 1.1 billion Euros in sales. Sapient made 63 percent of its 2013 sales in North America. Pubilicis has been hoping to make 50 percent of its sales from digital marketing by 2018. With the Sapient buy, Pubilicis will be making that goal immediately.
Read More – Publicis to buy U.S. Digital Ad Firm Sapient for $3.7 Billion (Reuters, Leila Abboud)