Interpublic could still be a takeover target as finances improve but growth and share price stall

Some Wall Street types think Interpublic, the alleged subject of a $6bn bid from Publicis Groupe a few weeks ago (denied by both parties, more energetically by PG) is still in play.

Forbes reports that CEO Michael Roth (left) has wrung a startling profits rise out of the company even though its revenue has hardly risen. The company has also bought back nearly a fifth of its shares and announced it is to pay a dividend, evidence that its cash position has improved markedly.

Business Insider describes Roth’s recent address to Goldman Sachs’ Communacopia conference (where do they get these..) where he offered three reasons why his company wasn’t going to be taken over: It didn’t need the money (see above), it was more competitive in the market (arguable) and nobody had offered an attractive price (that’s a bit more like it). So the door’s half open.

BI also shows that the company’s shares have gone precisely nowhere since the great crash of 2008 despite Roth’s financial ministrations, suggesting that the market is unconvinced about its ability to turn its improved finances into growth. Interpublic shares remain markedly cheaper than WPP or Omnicom.

When rumours of the PG bid emerged Interpublic shares shot up nearly 15 per cent. They have since fallen and, without a bid, look set to languish. It may be that IPG’s key managers, chiefly Nick Brien at McCann and Laurence Boschetto at DraftFCB can get their networks moving forward. Brien has made some progress recently with wins from Ikea and Sony’s Experia although last year was chiefly notable for losses. Boschetto has his work cut out in Chicago having also lost a number of accounts, mostly notably $1bn SC Johnson.

So who might want Interpublic (bearing in mind that some of its shareholders at least want to sell)? It’s hard to look beyond Maurice Levy’s PG. Levy has shown he’s not afraid to bid big, most recently by paying $540m for the digital delights of LBi. He also paid $575m for another digital firm Rosetta last year and then about the same amount on buying back most of Dentsu’s 15 per cent stake in February. Which Dentsu promptly reinvested in buying Aegis for £3.2bn.

$6bn or so is a much bigger leap than Levy’s other recent deals and would he really want DraftFCB, for example? But Interpublic has other goodies outside traditional advertising, most notably digital outfit R/GA and PR network Weber Shandwick. DraftFCB could just be closed (gulp) and its accounts absorbed into one of the other networks (PG owns Publicis, Leo Burnett and Saatchi & Saatchi).

Omnicom too may fancy a big deal, having been favourite to buy LBi but appearing to have baulked at the very toppy price. CEO John Wren might see McCann as a good addition to BBDO, DDB and TBWA and R/GA would give him the digital brand he lacks.

All speculation of course but when a company has been cleaned up, like IPG has, and the share price still obstinately refuses to move forward then a bid from a competitor often follows. Some of the heavy lifting has already been done.

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About Stephen Foster

Stephen is a former editor of Marketing Week and London Evening Standard advertising columnist. He wrote City Republic for Brand Republic and is a partner in communications consultancy The Editorial Partnership.