ADK/WPP battle shows why private equity is circling quoted agencies

Bain Capital Private Equity has extended its $1.3bn tender offer for Japanese agency ADK with ADK shareholder WPP, which has opposed the bid, taking ADK to arbitration over the way it has sought to terminate the agreement between the two companies even though, it seems, WPP wants to end the relationship.

Presumably WPP wants Bain to sweeten the deal.

At the same time Bain Capital MD David Gross-Loh has given an intriguing insight into the way the private equity business sees the publicly-owned agency business saying: “The global advertising industry is undergoing significant change and the traditional business model is in crisis. The Japanese advertising industry, including the nation’s third largest advertising agency ADK, has not escaped this trend. Being nimble is more important than ever to remain competitive and privatization is the only viable opportunity ADK has to realize its potential in such a changing landscape.”

Some, including WPP no doubt, would say: he would say that, wouldn’t he? But Bain won’t be the only private equity eyeing marcoms assets, especially as all the big quoted holding companies giants have suffered sharp share price falls as growth has ground to a halt in the midst of client suspicions over media agency doings and margins.

Delivering quarterly increases in revenue, organic growth and profits has suddenly become very difficult and the best opportunity for some at least of these agency assets and their managers and employees may be ownership which can afford to take a longer terms view.