Interpublic Group's stock price was down more than 2% in mid-morning trading Tuesday, as Wall Street digests the implications of the company's planned $2 billion-plus acquisition of Acxiom Marketing Solutions.
The definitive agreement was announced after the markets closed Monday afternoon.
IPG executives talked at length before the markets opened today on a conference call with analysts about the benefits of the deal, the biggest for IPG under the reign of long-time CEO Michael Roth.
“With Acxiom, IPG will bring to market the leading capabilities in our industry across data, analytics, media buying and planning, and marketing technology expertise,” Roth told those on the call. “We jump ahead several years toward fulfillment of IPG’s strategy in data and analytics, which we have outlined for you in the past. This foresees a data platform that all of our agencies – digital, PR, creative, and media – can tap into.”
Managing data at scale, Roth said, has become an essential offering to clients for all agency holding companies. The acquisition, he added, “opens a 360 degree view of each individual consumer,” and “will enable us to design, build, manage and unify the foundation of marketing data.”
Roth also touted Acxiom’s strong reputation for data privacy and security. “It is hard to overstate the importance of trust in first-party data management, and a company that has demonstrated ethical data guardianship over time, has an important advantage.”
Philippe Krakowsky, Chief Strategy and Talent Officer at IPG and CEO of the firm’s media management arm Mediabrands, told analysts that in the past the company had been “comfortable” renting data and building a product layer on top of that. But given the paramount importance of data management for marketers today, that strategy is no longer sufficient.
“Going forward, the ability to ethically source, manage, and leverage first-party data and P.I.I. [personally identifiable information] will be too important a differentiator for our sector and related industries,” he added.
Commenting on the deal in a client note, Pivotal Research senior analyst Brian Wieser wrote: "The deal is significant for IPG especially because it illustrates that the company is looking to evolve and move forward on a standalone basis, and also because it incrementally diversifies the company’s revenue sources.
"While management expects the transaction will be accretive to earnings, our cashflow-driven model leads to a lower price target vs. previously considering the amount of capital required to complete the transaction and our expectations for ongoing capital expenditures in support of growth.
Overall, we view the acquisition favorably."
Wieser continues to rate IPG a "hold" for now.