Is It Better to Buy an Agency or Grow Organically?

Publicis Groupe’s purchase of LBi last September grabbed headlines as one of the year’s biggest agency acquisitions. But as the French holding company now grapples with integrating the digital shop into Digitas, dealing with client conflicts between General Motors and Volvo in the U.S., the jury is still out on whether it’s wiser to buy pricey agencies or go the less sexy route, like Omnicom, and focus on organic growth.

Publicis bought LBi for a cool $520 million. For the sellers, the timing was right—what they’re doing may not be so special in another five years, as digital becomes a more central discipline at traditional agencies.

For buyers looking for scale and staring at a thinning crop, LBi was ripe for the picking. Various players looked at LBi (with $300 million in revenue) and took a pass—among them, Omnicom. “Our competitors have gone out and bought billions of dollars worth of interactive companies—talking about how they’re growing so fast, how high their margins are and how that’s going to power their business in the future,” said Jonathan Nelson, CEO of Omnicom Digital. “Yet we’re growing fast or faster without taking on the debt and complexity of the acquisitions.”

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