Given there's been so much disruption from technology, the market has become complex and fragmented. It's only natural that clients should crave greater simplicity from their partners.
In the face of this and an increasingly competitive landscape it's no surprise holding company groups should try to better leverage the talent they have and seek greater collaboration, at the same time as targeting operational efficiencies.
WPP's recently announced plan to bring together Possible Worldwide and Wunderman makes a lot of commercial sense. The integration would combine Wunderman's data, creative and technology skills with Possible's specialisms in commerce, content and customer experience. At the heart of this lies the combination data and creativity, the sweet spot most marketers are focusing on.
It's not just WPP; there have now been a number of examples of the network players integrating their business units under a single brand. Last year Publicis collapsed a lot of its sub-brands into Publicis One in some of its markets. The network has also reorganised many of its digital assets globally – SapientNitro and Razorfish for example. Returning to WPP, we've also recently seen it merge Maxus and MEC. Mostly this strategy represents a concerted effort on the part of the networks to break down silos to foster a more collaborative culture.
This theme of collaboration is something that is increasingly talked about and this also has roots in challenges to the traditional holding company structures, which house many competing businesses. These are coming from competitors such as Dentsu and the management consultancies, which are building more unified offers.
While there are also back office synergies to be made, the Wunderman/Possible Worldwide integration wouldn’t necessarily be an easy task given the number of markets both businesses operate across, and their sheer number of offices. It would likely take some time for the operational efficiencies to be felt – unlike Maxus and MEC for example.
A key facilitator would lie in Mark Read's vision and proximity to both networks. As the current head of Wunderman and former lead of WPP Digital, he’s had sight of both businesses and the potential for a tie-up would likely be very clear to him.
The combination of commercial drivers of what clients want, competition and the need for margin growth means we will most likely see more consolidation within the holding companies’ networks. While, in theory, greater collaboration and a breaking down of the silo mentality could mean less M&A as the individual operational costs of a group no longer build up competing skills sets, in practice it’s highly unlikely this will impact M&A in any meaningful way. Demand for high growth, new capabilities - and particularly new technologies and data-driven businesses - are very high on the agenda and I can’t envisage that changing.
In the case of WPP, the group has always been on the look-out for new services, particularly in digital, and new markets. I don’t think that over-arching strategy will change as a result of bringing together two parts of the business. Growth is always key, and while part of that is organic, M&A will always play a highly significant role.
Mark Cox is the director at Results International