City View - What lies ahead for Interpublic after year of agency movements?

Following a tumultuous year of global agency movement, City bankers have another big question to consider over Christmas lunch – is Interpublic planning another bout of restructuring in 2005?

Chief executive David Bell played down speculation that 2005 could herald further internal mergers, disposals or, perhaps, a break-up of the entire group – which houses Initiative Media and Universal McCann.

Speaking on the sidelines of the Credit Suisse First Boston media conference in New York last week, chief executive David Bell told Mergermarket that Interpublic – or any of its major component parts – is not for sale and the group does not plan to be broken up into pieces.

He argued that the company’s retention of key advertising executives, lowering of debt and stronger balance sheet are signs that the company is now in a stronger position.

Bell also said that the major divestments of Interpublic’s ongoing turnaround process had been completed, but the company is still “reviewing” its portfolio and some minor sell offs could be made.

Interpublic has had a tough time of late. Initiative recently lost the global Unilever account worth £555m, while Universal McCann lost the £894m global Nestlé brief.

To compound matters, the global General Motors account is rumoured to be currently under “review”, according to one industry source.

This has fuelled speculation by media bankers, consultants and industry sources that the group may be seeking a new prescription. One industry source claimed: “further restructuring is inevitable.”

One industry adviser said a break-up could be on the cards – because some of Interpublic’s component parts, such as the global advertising network McCann Erickson, are worth much more than the Interpublic Group itself.

However, one media banker said that, if a break-up were to happen, it should have been done already, which may be a sign that financial institutions are not that keen to take on the task.

Another scenario voiced by several banking and industry sources is that Interpublic might look to internally merge Initiative Media and Universal McCann.

One industry source argued that InitiativeMedia was founded on the basis of handling the Unilever account. “It could be critical for the agency if it were to lose the GeneralMotors account,” said an industry source from a competing agency.

An internal merger of the two media agencies could consolidate buyer power and reduce costs, argued banking sources.

 By Ben Harrington

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