Digital Futures: Omnicom Rumored To Consider LBi Buy

by Steve McClellan, Jun 27, 2012, 1:20 PM

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Neither Omnicom or LBi were commenting officially on word today that they were discussing a possible $575 million deal that would bring the latter into the Omnicom fold.

If a deal is reached, LBi would be the second big acquisition of a major independent digital shop since WPP agreed to buy AKQA last week for $540 million.

At the time, analysts predicted a new wave of consolidation within the independent digital agency ranks as holding companies continue to bulk up their capabilities in the space.

Earlier this week, LBi made it clear that it was for sale, issuing a statement Monday confirming it was engaged in sale talks without identifying the potential buyers, which it described as “third parties interested in pursuing further consolidation in the sector.”

This morning after word leaked of the Omnicom-LBi discussions, Brian Wieser, senior analyst at Pivotal Research Group, issued a note to clients stating that “the sector remains well-situated for further consolidation.”

Holding companies may have competition from other suitors, such as Big Data players like IBM and Adobe. “Their efforts will help catalyze the agency holding companies given the increasing scarcity value associated with premiere agency assets,” Wieser wrote.

If an LBi deal does go through at $575 million, Wieser estimated that price would reflect a multiple of 11 times earnings before interest, taxes, depreciation and amortization (EBITDA). By comparison, he said, WPP agreed to pay about 13 times EBITDA for AKQA, which was about what Publicis paid for Rosetta last year.

LBi is a European agency, but the Continent’s economic woes don’t appear to be impacting the shop’s business; it generated nearly 18% organic revenue growth in the first quarter, Wieser stated. “As such, we think an acquisition of LBi would likely be favorable for Omnicom’s overall business, as well as its stock.”

It’s not certain how Omnicom would align LBi within its organization if a deal goes through.

Just last week the holding company’s global agency network TBWA created the Digital Arts Network to house its digital assets around the world. Headquartered in New York, it will roll out initially in 18 markets, including Australia, Canada, Denmark, France, Germany, greater China, Japan, Mexico, South Africa and the U.K.

It’s conceivable that LBi would be aligned with DAN in some way. That said, WPP stressed that AKQA would remain a standalone entity once the acquisition is complete and would be led by current management. Omnicom could take that approach with LBi as well. 

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