Publicis Groupe has been trying to explain the whopping €1.4bn impairment charge it’s taken against its digital agencies now grouped in Publicis.Sapient. This forced the company into a 2016 loss of €527m.
Vice-president Jean-Michel Bonamy (left) said: “The thing is, when we do the impairment test, we no longer do it at the level of the agency. It’s at the level of Publicis.Sapient which is comprised of Sapient, Razorfish, Rosetta, Digitas and LBi.” He told Campaign that Publicis.Sapient had a goodwill and intangible value of €4.9bn, which it did in the books maybe but not in reality. In other words Publicis has drastically overpaid for this gaggle of digital “assets.”
We did wonder at the time why it needed Digital, LBi, Razorfish and Rosetta when they all seemed to do the same thing. In its time it’s overpaid for other agencies too, the UK’s BBH for one.
Razorfish, bought from Microsoft for a staggering $530m back in 2009, seems to be the biggest basket case with Bonamy referring to cash flows under pressure. But he went on to say that that “improving our exposure to digital transformation requires that we invest more” although he admitted this would have an impact on margins and growth.
Er why? Digital transformation has happened, there’s nobody out there with a killer app. The sensible policy would simply try to become better at it. But the holding companies (some more than others) seem convinced that buying is the only way they can grow. Publicis’ dismal numbers may be the first concrete sign that this policy’s time is up.