IPG Hefty Price for Revenue Diversification
The narrow-moat firm is acquiring the marketing solutions business of Acxiom.
The narrow-moat firm is acquiring the marketing solutions business of Acxiom.
Interpublic Group (IPG) announced it is acquiring the marketing solutions business of Acxiom, a data solutions provider. In our view, while IPG will gain access to valuable global consumer data which can help the firm diversify its revenue and possibly become a one-stop shop for advertisers, Acxiom's marketing solutions will also require more capital expenditure for system maintenance and data management, likely offsetting benefits of faster top-line growth and slight margin expansion. Plus, this $2.3 billion all-cash acquisition represents 3.5 times trailing 12-month revenue, which we think might be too high given that revenue has declined the last three years. After incorporating our estimated impact of this acquisition on IPG's top and bottom line in our 10-year explicit forecast period, we are maintaining our $25 per share fair value estimate. While IPG shares are down nearly 3% in reaction to the announcement, we continue to recommend a wider margin of safety before investing in this narrow moat and medium uncertainty rated name.
Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.
Ali Mogharabi does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.