Advertising titan WPP plc (WPPGY) recently announced that it has signed an agreement to acquire Who Digital, a leading full service digital agency in Vietnam. The acquisition is a part of the company’s ongoing efforts to increase its exposure to one of the fastest growing markets in the world.
The completion of the transaction is subject to regulatory approvals. Post acquisition, WPP plc will acquire majority stake in a joint venture formed between Who Digital and OgilvyOne.
Who Digital based in Ho Chi Minh City was founded in 2005. The digital agency had gross assets of approximately VND 13.8 billion as of December 31, 2010. Its client base includes the likes of Unilever, Megastar, HSBC, Baoviet and Sony Ericsson.
We believe WPP plc lays a lot of emphasis on new and rapidly developing markets, new media and consumer insights. The acquisition of Who Digital expands the company’s portfolio in Vietnam. The company earlier had acquired the majority stake in T&A Communications, 20% stake in Smart Media and interests in three subsidiaries of the DacvietVAC Group Holdings.
Future seems very bright for WPP plc as the company is very well placed to reap benefits from its dominant market share in many areas. Margins and profit growth is also adequately supported by the company’s pricing power. Moreover, revival in the global economy has enhanced advertising spending by the companies across the world.
Global advertising expenditure is expected to be approximately $502 billion in 2011, representing an increase of 5.8% over $474 billion in 2010, according to a report by GroupM. It is anticipated that expenditure in the U.S. would be roughly 29.4% of the global forecast, an increase of 3.7% over $142.5 billion in 2010.
WPP plc faces competition from its peers like Interpublic Group of Companies Inc. (IPG), Omnicom Group Inc. (OMC), and Publicis Groupe SA.
We currently maintain an Outperform recommendation on the company.
