Wall Street is still reacted to Sunday’s Publicis-Omnicom merger by driving up stock prices for competing companies in speculation that a wave of M&A might sweep the sector.
The merger has created a tier of two mammoth companies — Publicis Omnicom Groupe and WPP — with a bunch of smaller, also-ran holding companies a long way behind them in size. Many analysts see them as ripe for the picking.
Interpublic and Havas, for example, saw their highest figures in years.
Analysts told Bloomberg that the other large agencies like Havas, Aegis and Interpublic are now looking to consolidate as well, which makes sense considering that they will have to compete with an entity which, given its scale, will get premium print, TV, and online rates. Bloomberg reports:
The marriage of Publicis and Omnicom to become the world’s biggest agency may spur WPP Plc (WPP) to seek acquisitions of its own to regain its leading position in the industry, according to Bank of Montreal. Havas is one of the last available targets and could lure WPP, according to Natixis. A merger between Havas and Interpublic (IPG) is another possibility, said Liberum Capital Ltd., which also sees MDC Partners as a potential target.
Here’s how things looked on Wall Street.
While interest peaked when the market opened, stocks dipped slightly below Friday’s closing price by 0.6%. Its highest rise Monday was 8.3%.
The other entity in the merger saw a similar fate. At first traders were excited, with stocks rising as much as 6.6%, but come the end of the day everything fell flat.
Interpublic was the true winner yesterday. The holding company closed at the highest it has been in more than nine years at $16.61. That’s 4.7% up from the day before. The company’s highest bump was 9.8%.
A note from CEO and chairman Michael Roth circulated to staff after the merger went public that stated, “”as this weekend’s surprising news shows, there’s no telling what might take place, but we don’t see the need for major M&A to keep delivering on our plan to move Interpublic forward.” That doesn’t shut down the possibility of an acquisition, which we noted might be a good move earlier this year. MDC Partners is one potential target.
HavasHavas hit a 52-week high. It closed 4.6% up.
But CEO David Jones doesn’t seem gung ho about M&As any time soon. In fact, Jones came out very negatively regarding Publicis and Omnicom’s decision to merge. “”I’m not sure this is in the best interests of their clients or their talent,” he said in a statement. “Clients today want us to be faster, more agile, more nimble and more entrepreneurial, not bigger and more bureaucratic and more complex.”
Jones reiterated to Bloomberg, “We’re not interested in playing the bigger-is-better game.” Havas is significantly smaller than its competitors.
MDC Partners hit an all time high of $24.
Deutsche Bank has said that the holding company is an acquisition target, perhaps by Dentsu, on two separate occasions. CEO Miles Nadal, who would get a $15 million stock windfall if he ever sells, teased future consolidations to Bloomberg.
“Consolidation will continue to accelerate,” Nadal said. “We are a company whose control block remains in the hands of shareholders so I think, by definition, we are a company that anyone could bid for.” Of course, he continued he doesn’t have any short term plans.
WPP, which had its status as the largest holding company in the world snatched away come Sunday morning, had a far less exciting day. Though there were some spikes, as of this morning, stocks are down.
Size does matter for CEO Martin Sorrell, who is known for his rivalry with Publicis CEO Maurice Levy. And earlier this year, Business Insider’s Jim Edwards noted, “If either of the other Big 3 networks makes a deal to create a network bigger than WPP, Sorrell will be unlikely to sit idly by.”
Now it’s time to see what actually happens. Some analysts speculate Havas would be a good fit.
Sorrell has noted that while Publicis and Omnicom’s merger is “bold” and “surprising,” it will also cause Omnicom to “throw out a lot of opportunities” for the firm. Opportunities (aka clients) that WPP might be able to scoop up. Sorrell told CNN, “We’ve seen just in the first 24 hours a number of clients and talent are concerned about what this means for them. So there will be a reassessment.”
NOW WATCH: Briefing videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.