Interpublic Group, the world’s fourth-largest advertising holding company by revenue, is in talks to sell its prominent digital marketing agency R/GA to India’s Tata Consultancy Services (TCS), reports the Wall Street Journal.
$300 million valuation
While the details of the deal remain undisclosed, some sources estimate R/GA’s valuation could reach around $300 million. However, the negotiations are still ongoing, explains the Wall Street Journal, and there is a possibility the deal might not materialize due to disagreements on valuation.
A unique agency model
R/GA boasts an impressive client portfolio, having worked with top brands like Verizon, Google’s Android, Samsung, and Coca-Cola. They are especially recognized for their work with Nike, which included developing the Nike+ platform for runners. The company was created in 1977 by Bob Greenberg and established itself as a unique agency model. Greenberg, a well-respected figure in the advertising industry, offered clients a wider range of services beyond traditional ad creation, including product design and digital production. R/GA became part of Interpublic in 2001 through Interpublic’s acquisition of R/GA’s parent company, True North Communications.
Challenges in recent years
But the agency has faced challenges in recent times. R/GA has experienced executive turnover, client losses, and a decline in ad spending by tech companies, which has impacted the broader advertising industry. According to the Wall Street Journal, R/GA’s revenue last year dropped by roughly 20% to around $200 million.
Streamline its business
This potential sale represents Interpublic’s latest effort to streamline its business as Madison Avenue grapples with the rise of artificial intelligence and the need to adapt to a changing landscape. By potentially offloading R/GA, Interpublic, as a major player in the advertising world, seeks to revitalize its operations and become less reliant on creative services with lower profit margins.
Venturing deeper into the marketing world
It comes amidst a broader push by consulting firms to grow on Madison Avenue. These firms are building and acquiring agencies that offer brands a comprehensive package including digital transformation, experiential marketing, creative services, and web and mobile development expertise. This trend gained momentum in 2019 when Accenture acquired Droga5, a highly regarded creative agency on Madison Avenue. It sent a clear message: consulting firms are serious about establishing themselves in the advertising and marketing space.
