Omnicom Unit Buys "adam&eve"

Advertising agency DDB Worldwide, a unit of Omnicom Group Inc. ( OMC - Analyst Report ) , recently acquired London-based communications agency ‘adam&eve’ under a 10 million pounds deal. The acquisition entails expansion of the group’s operations in the United Kingdom creating a new agency, adam&eve/DDB, following the merger of adam&eve and DDB UK.

Launched in 2008, adam&eve served Cadbury plc and Google Inc. among its clients with high level of appreciation. On the other hand, DDB’s efforts toward the advertising campaigns of Volkswagen and Marmite were quite successful.

However, Omnicom unit suffered from recent account losses due to squeezed client budget toward advertising spending. With this recent acquisition, the marketing mix and creative exchange among the two are anticipated to strengthen client confidence while boosting revenue stream for DDB.

Omnicom believes in strengthening its potential and expanding client base globally through acquisition of complementary companies. Omnicom confirmed the acquisitions of Medical Collective Intelligence, MCI in Japan, &NIM Digital in China during the first quarter of 2012. Of late, in April 2012, Omnicom acquired a majority stake in Portland Communications as well. These acquisition activities are expected to work as a key factor to augment revenue growth, going forward.

We believe adam&eve/DDB merger will prove effective on the backdrop of worldwide increase in demand for media services, speedy growth of technologies and massive proliferation of channels. Moreover, Omnicom’s cost-effective marketing services in the field of advertising and marketing hold future prospects for the company’s margin management and directly competes with The Interpublic Group of Companies Inc. ( IPG - Analyst Report ) , Publicis Groupe SA ( PUBGY ) and WPP pl. ( WPPGY - Analyst Report ) .

We currently maintain a long-term ‘Neutral’ recommendation on the stock. The company holds a Zacks #3 Rank, which translates into a short-term (1-3 months) ‘Hold’ rating.