Advertising titan WPP plc. (WPPGY) recently announced that it has agreed to acquire one of the leading German-based marketing services network, Commarco GmbH. WPPGY will be acquiring the entire issued capital of Commarco, subject to regulatory approvals.
Commarco GmbH was founded in 1981 and is based in Hamburg, Germany. The company employs over 1,200 people throughout Germany, Switzerland and other selected international markets. It reported gross revenue of approximately €132.9 million and gross assets of roughly €98.6 million.
We believe WPP plc lays a lot of emphasis on new and rapidly developing markets, new media and consumer insights. Acquisition of Commarco expands the company’s presence in Germany, its third largest market after US and UK.
With a bright future ahead, WPP plc appears to be very well placed to reap the 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.
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