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More mergers on the horizon in 2017 as WPP AUNZ chases growth

WPP AUNZ CEO Mike Connaghan

WPP AUNZ will announce more mergers in the coming months as the business prepares to drive growth in its second year of operation, according to chief executive Mike Connaghan.

WPP AUNZ was officially created in April last year after WPP took a majority 61% stake and merged with STW Communications. In its first full year results, WPP AUNZ grew net sales by 1.2% to total $865 million and increased pre-tax profit by 3.5% to $141.6 million.

The results capped off a year littered with changes as the business sought to appoint new leadership teams, launch new divisions and create greater synergies between agencies within the group.

Among a host of changes this year alone, WPP AUNZ appointed a new leadership team for sponsorship agency Prism and launched a crisis management division called Scout.

It has also merged design businesses Landor and Designworks, combined local digital shop White with advertising agency Grey and merged digital agencies DT and AKQA, in a move that saw the latter open offices in Australia, New Zealand and Singapore.

CEO Mike Connaghan told The Drum more changes are on the horizon as the business seeks growth in Australia and New Zealand’s flat markets.

“We have brought together some amazing companies from WPP with some great local brands owned by STW and there’s some more things still on the drawing board. We’re looking at where we can take some local business and inject that with a global business and create a win-win for clients.”

“It will either be a local story with an international story or a digital asset that will compliment another asset, like we have done with White and Grey.”

Connaghan would not be drawn on specific agencies but did hint at areas where some changes might occur.

“There’s no grand blueprint, it’s really about where the opportunities present themselves," said Connaghan.

“We do have a lot of PR agencies and our PR brands are very strong – particularly Ogilvy PR - but some of the other PR agencies are definitely an opportunity. There are some nice brands that are underweight in this market for the strength of their brand and there’s some PR agencies that have quite decent revenue but they don’t make a great margin out of that. There’s possibilities there and there are more possibilities across the whole spectrum of the portfolio.”

“Martin Sorrell gave me this quote many years ago, he said, ‘A lot of value can be destroyed for the sake of organisational neatness’, we’re not just going to do it because it looks good on a page, we are going to do it for the benefit of both companies and ultimately for our group, our people and our clients.”

The mergers are part of the WPP AUNZ’s strategy to create, what Connaghan calls, horizontality as it promotes sharing knowledge, skills and talents across the group's 80 companies. To bring this to life WPP AUNZ has appointed a chief business director Rob Currie, chief strategy director Rose Herceg and group chief client director Kate Walker.

“We believe we can be gold standard for horizontality – it’s a bad word, but it’s about collaboration and partnership and creating better results for everyone.

“The marketing world is moving on fast forward and no one company, no one person, can possibly keep up with it but, I believe as a collective we can. But we need to get better connected and more organised to help our clients.

“We’ve got to keep growing and to do that we’ve got to keep winning more than our fair share of business. The market is not in high growth here in Australia and New Zealand and that is no surprise to anyone but that means we’ve got to win more than our fair share of that market,” said Connaghan.

While the Australian and New Zealand market’s remains relatively flat, as WPP's fifth largest market after the US, the UK, China and Germany, there is still a need for growth – albeit small increases.

It’s no surprise that WPP AUNZ’s digital companies are driving a large amount of growth for the business. This group reported double digit growth last year, however, he said the group is also seeing strong growth from outside of the marketing department.

“There’s no doubt that there is a lot of money being poured into that digital infrastructure space, it’s almost like rewiring for a lot of the client businesses. Clients are undertaking ecommerce deals, big user experience programs, and that marketing infrastructure is becoming the nuts and bolts of these businesses. However, these projects aren’t coming from the marketing department.

“A lot of revenue now comes from well beyond the marketing departments, whether that is from the HR office, IT office, the CEO or the board. Our goal is to have 100% of the clients customer experience budget, it doesn’t matter where that is.”

“I believe we are at the nexus of the growth and change going on. There’s never been a better time to be in this industry. Everybody talks about how tough it is and the structural change, that’s always been the case, ever since I’ve been working in the industry. I think it’s a fantastic time for the industry and we have an amazing opportunity,” said Connaghan.

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