The Wall Street Journal reported Omnicom is acquiring the largest independent advertising agency in Brazil, Grupo ABC, planning to fold it into DDB Worldwide. Omnicom will surely record the acquisition as a major diversity boost—but still refuse to provide EEO-1 data to prove it. Then again, the newfound diversity doesn’t necessarily lessen the cultural cluelessness, given the insensitive ignorance routinely displayed from Brazil. Plus, the majority of culturally clueless Caucasians at DDB probably think they just acquired Groupon.
Omnicom Boosts Presence in Brazil with Grupo ABC Acquisition
Grupo ABC’s clients include Banco Itau, Procter & Gamble and Johnson & Johnson
By Nathalie Tadena
Advertising giant Omnicom Group Inc. said it will acquire Grupo ABC, boosting the company’s presence in one of the world’s biggest advertising markets.
Grupo ABC, the largest independent ad agency in Brazil, will become a part of Omnicom’s DDB Worldwide division, the companies announced Monday. The deal is subject to regulatory approval in Brazil and is expected to close by the first quarter of 2016.
The São Paulo-based firm has clients ranging from Banco Itau to Procter & Gamble and Johnson & Johnson. DDB Worldwide will be gaining holdings that include DM9, which DDB already owned a majority stake in; Africa and Loducca, which DDB also had held minority stakes in; CDN; Sunset and Newstyle. Grupo ABC, which now has more than 2,000 employees, was founded in 2002 by Brazilian advertising executives Nizan Guanaes and Guga Valente, both of whom will stay in their leadership roles at the company.
“Grupo ABC is widely acknowledged as an outstanding company with impressive creative work and expertise in a broad range of disciplines,” said Omnicom Chief Executive John Wren in a statement. “Over the years, Grupo ABC have been great partners of Omnicom and their depth of talent will strengthen our business capabilities not only in Brazil but around the world.”
The deal will give New York-based Omnicom a stronger foothold in Brazil, the sixth-largest advertising market in the world. Ad revenue in the country is expected to increase 4.4% to $18.1 billion in 2015, according to Interpublic-owned research firm Magna Global. While ad spending in Brazil has been weaker than expected this year during the country’s economic downturn, the Summer Olympics in 2016 will be held in Rio de Janeiro and are expected to provide a minor boost to ad spending.
Omnicom’s deal with Grupo ABC will bring the company’s reported billings, which don’t include rate card discounts, in line with rivals Interpublic and Publicis in Brazil, though all three still remain behind WPP, said Pivotal Research analyst Brian Wieser. According to Grupo ABC’s website, the company had revenues of $402 million in 2012, though the exchange rate has since weakened.
“Brazil is one of the most important markets globally,” Mr. Wieser said in an interview. “For agencies, it’s probably a much more profitable market than larger markets like the U.K. and Germany not least because of unique laws that oblige creative and media to remain integrated. It’s also an important market for talent. In the long run, everyone expects Brazil to rebound.”
The company is not disclosing terms of the acquisition or how much it plans to spend on M&A in 2015. Reuters earlier reported that Omnicom was set to acquire Grupo ABC for one billion reais, which is about $270 million.
At that price, Grupo ABC would be Omnicom’s largest acquisition this year. Other 2015 acquisitions include German digital marketing agency TLGG, web analytics company Trakken, public affairs firm Mercury, search and web analytics agency Semetis, healthcare agency Cortex and data-on-demand firm Re-Mind. In 2014, Omnicom made 10 acquisitions of new subsidiaries and made additional investments in companies where it had an existing minority ownership.
Omnicom executives have indicated that the company has been looking at a number of potential acquisitions that could be announced in the fourth quarter.
“We’re going to continue to look for acquisitions that are the right fit, meet our strategic requirements, and we’re going to be aggressive in trying to find those assets [that] help us to grow the business, where we think it makes sense,” Chief Financial Officer Phil Angelastro said on the company’s third-quarter earnings call in October. “We are in the process of negotiating some deals. The pipeline is strong at the moment.”
On an earnings call in July, Mr. Wren said the company was “talking to” a couple of companies that would expand its presence in markets outside the U.S. and a couple of companies in media. In April, Mr. Wren told investors on an earnings call that the company had just formed a new dedicated acquisition group, which Omnicom had not had in several years. Omnicom would look at “sensible acquisitions,” that are mid-sized and fit its strategic growth areas.
“We’re looking at quite a number of opportunities, probably on a more formal basis than we have in the last several years. And so I expect over time we will be doing more,” Mr. Wren said in April. “No big bang type things.”
Omnicom was among the ad companies that had sought to buy digital agency Essence Digital, according to a person familiar with the matter. Omnicom declined to comment. Essence is now being acquired by WPP.