Sorrell promises more acquisitions from WPP

Sir Martin Sorrell, the chief executive of WPP, yesterday promised there would be more deals to come after completing the $1.52bn (£845m) acquisition of Grey Global, the world's seventh biggest advertising agency.

"There are clearly other opportunities," said Sir Martin. "When we do these things people come along and say 'is that the end?' but there are plenty more to do."

The advertising market has enjoyed an up-turn this year, thanks to the Olympics, the US presidential elections and other major sporting events such as Euro 2004.

However, Sir Martin warned that advertising growth could slow in 2005. "Post the US election we will have to see what the new or the old President does. Either party will have to do the right thing by dealing with the deficit and potential inflation. That may pull things back a bit to maybe 2 to 3 per cent growth next year," Sir Martin said.

Growth by acquisition has always been used by Sir Martin to complement WPP's strategy of organic expansion and yesterday Sir Martin spelt out there were also cost saving opportunities from the Grey Global deal.

"Grey has a staff cost to revenue ration of more than 60 per cent. Most of the other big agencies are between 55 to 60 per cent so there are opportunities to balance the costs more effectively," he said. The deal will add Procter & Gamble, the world's biggest advertiser, to the WPP stable of advertising and marketing services agencies and hopefully strengthen ties with existing joint clients such as tobacco group BAT, Nokia and Diageo, the drinks giant.

Speculation over future acquisition targets for WPP immediately focused on Havas, the French advertising agency, which attempted a bid for Grey itself despite opposition from a major shareholder, the French corporate raider Vincent Bollore.

Ed Meyer, the chairman of Grey Global who stands to make about £145m out of the deal and who will stay on until the end of 2006 said: "Grey's greatest asset is its people and while the ownership structure will change, our day-to-day business relationship with our clients will remain unchanged and our commitment to do great work will continue to be our passion."

The combined groups have revenues of £4.9bn and pre-tax profits of £514.5m. WPP will pay for the deal half in cash and half in shares, issuing 82.2m new ordinary shares which represents about 6.5 per cent of the enlarged issued share capital of WPP. The new group is aiming for a combined operating margin in 2005 of 14 per cent rising to 14.5 per cent in the year after.

"The addition of Grey Global will bring a number of benefits to our clients, our people and our shareowners," Sir Martin. said. "In addition to broadening our relationship with a number of leading clients, Grey will bring access to new clients and strengthen our activities in advertising and public relations."