WPP on acquisitions: ‘Prices have got ahead of themselves’ in India, Brazil (and digital in the US)

In its 2013 preliminary results filing with the London Stock Exchange Thursday, WPP reiterated what its helmsman Sir Martin Sorrell said last year, on valuation of companies in India being a hurdle to their acquisition.

In its financial guidance to investors, WPP said: “There is a very significant pipeline of reasonably priced small and medium-sized potential acquisitions, with the exception of Brazil and India and digital in the United States, where prices seem to have got ahead of themselves because of pressure on competitors to catch up.”

WPP’s net targeted acquisition spend is around £ 300 to £ 400 million in the year. These will be to increase its exposure to ‘faster growing geographic markets and sectors, and data investment management, including application of technology and big data.’
In its filing, WPP said it completed 38 acquisitions and investments in new markets in 2013 (of which 32 were in new media), 22 in data investment management (including data analytics and application of technology), while two were ‘driven by individual client or agency needs’.

It added: “There appears to be some growing evidence that excessive, competitive acquisition pricing together with lower standards for compliance, driven by a desire to play catch-up are resulting in slower, and even negative growth rates for competitors with several acquired companies in Brazil, India and China.”

In 2014, WPP has made acquisitions so far in the United States, Netherlands, Poland, Russia, South Africa, China and Vietnam.

Revenue growth in 2013

The results filed show WPP’s 2013 revenue up 6.2 per cent over the previous year at £ 11.02 billion, ‘led by strong growth in Asia Pacific, Latin America, Africa and the Middle East and the UK’.
In the fast growth markets of Asia Pacific, Latin America, Africa and Middle East, and Central and Eastern Europe, revenues grew 7.9 pc (at constant currency) to 3.3 billion in 2013.

BRIC countries accounted for almost $ 1.9 billion (over £ 1.1 bn) in revenues, up close to 7 pc on a like-for-like basis (discounting acquisitions, at constant currency). Including associates, this figure stands at $ 2.5 billion.

Horizontality at work
 

The WPP filing says the employee count has gone up 3 pc to 175,000 (full-time) in 2013.

It notes that 489 WPP clients are served in four disciplines accounting for over 57.5 pc of revenues. It added: “This reflects the increasing opportunities for co-ordination and co-operation or ‘horizontality’ between activities both nationally and internationally and at a client and country level.”

WPP estimates that ‘well over a third’ of new assignments in the year were generated through joint development of opportunities by two or more Group companies.

Also read:
‘Our deal pipeline is far bigger now than it’s ever been’