“We have set a price that is in line with the value of the company and capable of sustaining WPP’s growth in its core businesses”
British communications group WPP has just announced the sale of consultancy firm FGS Global to Kite Bidco, a company controlled by investment fund Kohlberg Kravis Roberts (KKR), which paid US$775 million for a stake of around 50% of the company, valued at US$1.7 billion.
With the deal, the WPP group will be able to focus its efforts on its public relations, creativity and media operations. The latter is precisely the area that is currently driving the group’s expansion.
WPP’s business reorganization began with the merger between Finsbury, The Glover Park Group and Hering Schuppener in 2021, followed by the acquisition of Sard Verbinnen in the same year, in addition to the incorporation of KKR as a minority shareholder in 2023, transforming FGS into a company with 1,400 specialists and 1,600 clients.
The deal will not affect WPP’s results in 2024. The transaction is expected to be completed later this year, subject to regulatory approvals. The process was led by Goldman Sachs International.
“The sale of FGS represents an excellent opportunity for WPP. Through FGS, we have built a global leadership in communications strategy and consulting, creating value for stakeholders. We have set a price that is commensurate with the value of the company and capable of sustaining WPP’s growth in its core businesses, including Burson and Ogilvy Public Relations,” explains Mark Read, WPP’s chief executive officer, in a statement.
For Alexander Geiser, global CEO of FGS, this new moment highlights the work done over the last four years by three independent consultancies, alongside Sard Verbinnen. “I thank WPP for helping to drive the company’s growth. We look forward to continuing the support extended by KKR, which shares our vision and strategy, to help clients navigate the complex environment of their target audiences,” says Geiser.
Media continues to drive growth
WPP Group revenue reached £7.2 billion in the first half of 2024, up just 0.1% from the same period last year. The GroupM media business grew 1.9%, driven by the Nestlé account win. The global integrated agency network declined 2.8%.
Ogilvy stands out with the Verizon account, in addition to consumer clients and spending stabilization with technology players, while Hogarth strengthens with demands guided by artificial intelligence (AI) for increasingly customized solutions.
VML continues to be impacted by the loss of Pfizer, but shows a recovery in the second quarter driven by the technology area. At AKQA, results were shaken by project delays. North America (-1.6%), the United Kingdom (-2.6%), Continental Europe (-4.8%) and China (-20.3%) showed declines, while India grew 8.1%.
Second trimester
WPP’s revenue fell 0.5% in the second quarter of 2024. The company had already reported a 1.4% contraction in its results for the first three months of the year, to £3.4 billion, a 1.4% drop compared to the first quarter of 2023.
In this section, the growth seen in North America (2%), Western Europe (0.3%) and India (9.1%) contrasts with the decline observed in the United Kingdom (5.3%), China (24.2%) and the rest of the world (2.2%).
“The second half of the year delivered a sequential improvement in net sales with continued growth from GroupM, Ogilvy and Hogarth, Burson and VML, as well as specialist operations. It is worth noting that North America returned to growth. That said, we have seen pressure in China and our related projects which, with the uncertainties in the environment, has led us to moderate our forecasts for the year,” comments Read.
The performance of integrated agencies also declined, to 0.6%. Despite the 1.4% increase recorded by the media agency GroupM, integrated creative operations suffered a 2.4% decrease. The ten main clients grew by 2.5%. Players in the automotive sector served by the group increased revenue, while those in the technology sector showed stability.
Revenue from new businesses reached US$1.7 billion. AstraZeneca, Colgate-Palmolive, J&J and the Government of Canada are among the achievements. Solutions supported by the artificial intelligence platform WPP Open helped optimize the operations of Burson, GroupM and VML.
