Interpublic Group Gets Delaney - Analyst Blog

The Interpublic Group (IPG), the third largest advertising company in the world, plans to acquire Delaney Lund Knox Warren (DLKW) from London-based Creston Group for $40 million in an all-cash transaction. Delaney is among U.K.’s top 10 full-service communications agencies.

Delaney will be providing Interpublic Group with powerful ideas for marketing communications services.

Interpublic Group has been growing through its continuous efforts to make strategic investments. In 2008, the company built on this strategy and completed an important transaction that increased its stake in the Middle East Communication Networks (MCN). The company’s partner in Russia is the acknowledged advertising leader in that country. In China, the company operates with all of its global networks and across the full spectrum of marketing services.

However, the company depends on a few significant customers for a large proportion of its revenues, which could substantially affect its business should these customers falter. The company’s top ten clients accounted for almost 24% of total revenue in 2008 and 2009.

Interpublic Group is exposed to exchange rate fluctuations, as approximately 45% of its total revenue is generated from international operations. However, the company’s cost containment initiative should help it to thrive as demand for marketing services gradually picks up in a broader recovery.

During the first quarter of fiscal 2010, total operating costs as a percentage of revenues declined 180 basis points. Nevertheless, the company operates in a highly competitive market. Thus, we maintain our Neutral recommendation on the stock until there is further economic stability.