Microsoft Sells Razorfish To Publicis For $530M
Big industry news today. Publicis, the French marketing and communications network has beaten rivals including WPP and Dentsu in the race to acquire Razorfish from Microsoft.
The deal, which values the digital agency at about $530 Million, includes a five-year media buying relationship between Publicis and Microsoft. About 55 per cent of the purchase price will be settled in cash, with the rest in treasury shares, depending on the Publicis share price.
Razorfish is one of the largest interactive marketing and technology companies in the world. Microsoft is Razorfish’s largest client. The agency designed the interface for Bing, Microsoft’s search engine. Other clients include Ford, Best Buy and McDonald’s.
Steve Ballmer, Microsoft’s chief executive, said: “We look forward to continuing to work with Razorfish as one of our agencies.”
Publicis, which also owns Saatchi & Saatchi and ZenithOptimedia, hopes Razorfish’s technological and e-commerce expertise will complement its analytics and advertising creative skills at Digitas, acquired for $1.3bn in 2007.
Morgan Stanley conducted the sales process for Microsoft, while Blackstone advised Publicis.
Source: FT.com
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WPP has been on a M&A spree the last 2 years and probably was not able to acquire Razorfish eventhough they wanted it.
WPP covets marketing services companies in new media. WPP CEO Martin Sorrell has tabbed three areas of growth for the firm: emerging markets, research and analytics, and digital media. He’s already made big bets in digital ($649 million for 24/7 Real Media in May 2007) and research ($1.9 billion for TNS last October). Razorfish would represent a bold move to shift the company away from its reliance on traditional advertising and media buying. Earlier this week, Sorrell told CNBC he’d be interested in Razorfish.
Yet the chances of a deal being struck in the near term remain remote, according to analysts. For one, the acquisitions market is moribund, with credit still hard to come by for an acquisition that would cost between $600 million and $800 million. Razorfish generated revenue of $408 million last year. WPP, in particular, would seem unlikely to have the financial wherewithal to make an acquisition, after shelling out nearly $1 billion on digital acquisitions over the past few years. It is still in the throes of integrating TNS, too. Even as Sorrell expressed interest, he said WPP earmarked about $160 million for acquisitions, a fraction of what it would take to get Razorfish. That leaves Publicis as the only likely candidate to take on Razorfish and that is what happenend.
@ Mark
Interesting point of view. And true in many ways. However I feel that Razorfish fits digital media or marketing pretty well, but $530M is overpaid in this economy.
So in strategic chess and driving up the buying price for Publicis, it was certainly a smart move to be part of the bidding process and openly admit being interested.
It’s like bidding on eBay: the more potential buyers and bidders, the more the price goes up
If WPP is smart, it will integrate it’s own acquistions better, so revenues go up for free.
It’s like the godfather movies: keeping it in the family
Cheers
Igor