OMC Steps on Asian Med Dais - Analyst Blog
March 09 2012 - 8:30AM
Zacks
A strong ad market, tough peers, an
increased consumer spending behavior-- both in the domestic and
international markets—have been increasing the likelihood of
acquisition activity among the ‘Admen’. In this backdrop,
Omnicom Group Inc. (OMC), one of the world’s
leading global marketing and corporate communications companies,
also stands to gain from strategic acquisitions aimed at fortifying
the group’s business while inducing long-term profitability.
Recently, Omnicom Group's
Diversified Agency Services (DAS) announced an agreement with
ITOCHU Corporation and a number of venture capital funds to acquire
a majority stake in Medical Collective Intelligence Co. Ltd. (MCI).
MCI is a highly respected Japanese online medical communications
agency, founded in 2007. It offers clients in the pharmaceutical
and medical device industries with powerful online market research
services and online CRM solutions.
Diversified Agency Services (DAS),
a division of Omnicom, manages Omnicom's holdings in a variety of
marketing disciplines, including customer relationship management,
public relations and specialty communications. The division’s deal
with the Japanese communication agency looks impressive as the
combined strength of Omnicom's healthcare agencies with the digital
capabilities of MCI is anticipated to significantly boost Omnicom's
overall client offering in Japan. The acquisition is also expected
to position Omnicom as the leading dedicated healthcare marketing
group in Japan. ITOCHU remains a shareholder in this acquisition
deal—partnering with the focal parties concerned--to grow and
develop the business.
Omnicom’s key growth strategy
involving acquisition of complementary companies is aimed at
expanding its client base while strengthening the entrepreneurial
management teams globally. The latest acquisition involves a
stronger challenge for Omnicom to operate in the world's second
largest pharmaceutical market. MCI's digital CRM solutions
and research are well poised to capitalize on the fastest growing
marketing communications sector, backed by the increased client
spending on digital and interactive communications platforms.
MCI is also looking forward to
further extend services throughout the Asia-Pacific region. With
their online market research and detailing solutions, they plan to
penetrate into the diverse growth markets of China and India, and
other South East Asian countries. With this partnership with
Omnicom, they foresee expansion opportunities in the U.S. and
Europe with customized solutions in the significant healthcare
markets. MCI has planned to persist its operation as a stand-alone
agency within Omnicom in Asia, working closely with its sister
healthcare companies including Targis, AgencyRx Japan and Polaris
Consumer Healthcare.
Omnicom's branded networks and
numerous specialty firms provide advertising, strategic media
planning and buying, digital and interactive marketing, direct and
promotional marketing, public relations and other specialty
communications services worldwide. It directly competes with its
peers, such as The Interpublic Group of Companies
Inc. (IPG), Publicis Groupe SA (PUBGY)
and WPP pl. (WPPGY).
The strategic acquisitions,
clinched earlier by the company viz, Indian PR agency, Sampark, New
Zealand-based TouchCast, Biz Tequila from Vietnam and Jump in the
Netherlands, are quite noteworthy. Besides, strategic acquisitions
in complementary businesses and increased integration, needs
special mention. We believe, such deals in time, would be accretive
to growth and business development.
We currently maintain a long-term
Neutral recommendation on the stock. Omnicom has a Zacks #3 Rank,
which translates into a short-term Hold rating (1-3 months).
INTERPUBLIC GRP (IPG): Free Stock Analysis Report
OMNICOM GRP (OMC): Free Stock Analysis Report
PUBLICIS GP-ADR (PUBGY): Free Stock Analysis Report
WPP GRP PLC (WPPGY): Free Stock Analysis Report
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