The announcement of WPP’s half year results earlier this week
provided a powerful vindication, not only of the group’s decision to
diversify beyond its core above-the-line business, but also of the
general trend towards PR acquisitions in the advertising industry.
WPP’s public relations businesses, including Hill and Knowlton and
Ogilvy PR Worldwide, emerged as the fastest growing segment of its
A PR growth rate of 22 per cent, described as ’a triumph for PR’ by the
Times, outstripped the growth of its above-the-line businesses by 13 per
cent. Its PR operations have also continued to improve their operating
profits and margins - again outstripping the advertising business which
traditionally operates on slimmer margins.
What this kind of growth rate suggests is that consultancies should
beware of selling themselves short. The main sticking point on last
year’s rumoured deal between WPP and Dewe Rogerson was reported to have
been price. The agency was believed to be looking for pounds 25 million,
a price deemed by WPP to be too steep. But the fact that talks fell
through may be a blessing in disguise as it is now allegedly in talks
with Incepta, with a rumoured price tag of pounds 30 million.
There are increasing pressures on independent consultancies to sell, but
PR is rapidly becoming a premium product. It is currently a growth
business while advertising is not. And if the round of consolidations is
set to continue, consultancies must be confident of their value, and the
offering they can bring to the advertising agency table.