Publicis Groupe Acquires Razorfish From Microsoft For $530 Million
By Anna Johnson on August 9th, 2009Publicis Groupe SA is set to acquire digital marketing agency, Razorfish, from Microsoft Corporation for approximately $530 million in cash and 6.5 million Publicis Groupe treasury shares.
There has been widespread speculation that Microsoft would offload Razorfish at some point. It makes sense too – whilst Microsoft has certainly moved into the online ad sales space, its ownership of a digital marketing agency has never seemed like a natural nor an entirely ‘conflict free’ fit.
After all, through its ownership of Razorfish, Microsoft has essentially been acting on both the ‘sell’ side – by virtue of selling ads on its search and content networks – as well as the ‘buy’ side by having Razorfish develop online advertising campaigns for clients.
Still, the deal won’t see the companies part ways altogether; Microsoft and Publicis have also signed a strategic alliance agreement. Under this agreement, Microsoft will guarantee favorable terms to Publicis Groupe media clients that purchase a minimum level of display and search advertising from Microsoft over a 5 year period.
The strategic alliance agreement also provides that Razorfish will be a preferred provider to Microsoft for digital strategy, creative and experiential marketing services, and contains a commitment by Microsoft to spend a minimum amount for those services each year during the term of the agreement.
For Publicis Groupe’s part, the Razorfish acquisition allows the group to consolidate its presence in the digital marketing space. The purchase of Razorfish will see Publicis Groupe derive approximately a quarter of its annual revenues come from digital communications, according to Maurice Levy, Chairman and Chief Executive Officer of Publicis Groupe.
Razorfish, which began at the dawn of the commercial Internet back in the 1990s, will continue to be led by the existing managing team, headed by Chief Executive Officer Bob Lord. It will also continue operating under the same brand name.
Organizationally, Razorfish will become part of VivaKi, a new Publicis Groupe entity created in June 2008 to leverage the combined scale of the autonomous operations of Digitas, Starcom MediaVest Group, Denuo, and ZenithOptimedia.
The transaction is expected to close during the fourth quarter of 2009, and is subject to customary closing conditions, including clearance under the United States Hart-Scott-Rodino Antitrust Improvements Act.
Razorfish’s clients include Best Buy, Ford, McDonald’s, Microsoft, and Starwood Hotels. Their response to the Publicis acquisition is not yet clear.
