Maurice Lévy Dropped $3.7 Billion on Sapient. Now What?

Publicis is rewiring for the future

Acquisitive Publicis Groupe chief Maurice Lévy champed at the bit during the nine months of merger negotiations with Omnicom, putting his ability to buy shops on hold. After the collapse of that deal in May, Lévy sprung back last week to underscore his global ambitions with a surprising $3.7 billion offer for digital company Sapient.

The multiple Lévy is paying is a 44 percent premium over Sapient's closing stock price, attracting attention to the biggest acquisition he's made since the 2002 purchase of Leo Burnett parent Bcom3.

The deal follows management upheaval and disappointing results at some of Lévy's existing digital properties, like Razorfish. Just last week, Razorfish Global announced a new management team, following the recent creation of the new Publicis network combining digital units Razorfish and Rosetta. At DigitasLBi, meanwhile, rumors persist that global chief Luke Taylor is on his way out, speculation Lévy denied.

There were no industry competitors bidding for Sapient, a company historically outside advertising, which only got into the digital agency business through the recent creation of SapientNitro.

"One-third of Sapient's business is classic IT services and consulting," said Seth Alpert, managing director at AdMedia Partners. "It will be interesting to see how Publicis embraces this part of Sapient's capabilities."

Another observer is more blunt about the curious fit. Referencing Lévy's own description of the acquisition, the individual said, "If Sapient is his 'crown jewel,' what does it make the other [Publicis digital assets]?"

According to industry consultancy R3, Publicis has invested $7.5 billion on digital acquisitions over the last eight years. (Aside from Digitas, Razorfish and Rosetta, they include Moxie, Big Fuel, Rokkan, MRY, Engauge, Heartbeat and Hawkeye.) Many have already been rolled into other Publicis digital operations. In September, Publicis acquired Nurun, a Canadian design and technology consultancy, for $115 million, and last month it struck a deal with Tel Aviv-based Matomy to buy up to 25 percent of the digital company.

There's been some muttering that the Publicis chief is considering the sale of one of his traditional ad agency networks (either Saatchi & Saatchi or Leo Burnett) while he accelerates the digital transformation of his company. Lévy acknowledged there may have been some internal suggestions of doing so, but he insisted, "I am not contemplating divesting any of our assets, certainly not a network."

Still, Brian Wieser, a senior research analyst at Pivotal Research Group, questions the strategic logic behind the Sapient buy. "Part of the problem is that it's not clear if scale matters so much in the digital world. The bigger issue is whether he is underinvesting in making investments in [Publicis'] creative agencies relevant," Wieser said.

But R3 principal Greg Paull sees it differently. "Publicis will now be just as likely to enter [client organizations] through the CIO or CFO as the CMO," he said. "This could also give them multiple relationship points which should make them a stickier proposition."