Last week WPP‘s CEO talked about the ‘real economy’ and how it’s actually holding up quite well. The same day, IPG also put out some positive statements following good results. Indeed if you look at the business news in recent weeks there have been a string of relatively positive statements made, albeit with some caveats attached. The only sectors that have continued to spew out bad news have been banking, housing and the some parts of the auto industry. Even retail has seemed pretty robust which lead a Forbes columnist to pick Target as a stock worth buying now that its PE has dropped to around 16. All this suggests that there are two economies playing out right now. Unfortunately only one of them seems to be getting any attention. The ‘real economy’ as Sir Martin called it seems to get a passing mention, whereas the the mean, ugly one that the banks are wrapped up in seems to get a mountain of coverage. It sounds to me like the real economy needs some marketing support.
As Interpublic continues to struggle, the question becomes: “When will they get taken out?” rather than if. It’s quite clear from IPG’s most recent set of poor earnings (they’ve had a string of them), that the business is not about to turn the corner anytime soon. To try and correct matters the group has made significant changes to the management team and its corporate structure. None of which would appear to have worked. Revenues are sluggish compared to its peers and profits are, well.. they don’t make a profit and haven’t for some time. Reuters last week described the business as being in a ‘tailspin.” A mixture of accounting scandals and client defections is at the heart of the matter. The former has ratcheted up the accounting costs for the company putting it in to loss, while the latter has weakened the foundations of many of the Group’s businesses.
All of this points to the prospect that WPP, Publicis or Omnicom will take out IPG. Of course you may argue that they don’t need to. IPG would seem to be giving away their business right now. That said the business does still have sizeable revenues (around $5Bn a year) and would surely do better as a part of one of these Groups. I can only imagine then the pressures IPG shareholders are placing on the IPG board to find a suitor and get a deal done. So in my mind the question is definitely ‘When?’ not ‘If?’ and of course ‘Who?’
Michael Roth, CEO of Interpublic, has 14 days left to file accounts or risk the delisting of the business by the NYSE. This follows a string of accounting scandals and a government probe. Only a few days ago Interpublic had to announce it was firing staff that had presumably been fixing the numbers. The delisting of Interpublic would of course be terrible news for the business and would likely result in the scenario Business Week probed this week – namely a break up of the Group. That could mean brands such as Weber Shandwick, MWW and Golin Harris going on the block. Presumably WPP or Omnicom would snap them up at relatively low prices.
I for one wish this wasn’t the case. As a competitor I hardly want these businesses to do well. However, I have to say that no industry wants accounting scandals and government probes into one of its major players. Such things tend to scare away investors that help fund our businesses not to mention people that may be thinking of working in the PR industry. So while having my fingers crossed is unlikely to do much I do rather hope Michael meets his deadline for all our sakes.