H&K to Acquire Global Tanitim - Analyst Blog

Advertising titan, WPP Group Plc's (WPPGY) wholly-owned operating company, Hill & Knowlton entered into a definitive agreement to acquire the major stake holding in Global Tanitim Halkla Iliskiler Arastirma ve Ozel Egitim ve Danismanlik Hizmetleri A.S. in Turkey.

Global Tanitim is a public relations consultancy based in Istanbul. The company employs over 28 people and reported total revenue of TL 4.8 million for the year ended 31 December 2009. Gross assets approximated TL 2.0 million. Its prime clients are easyJet, Ernst & Young, Research In Motion (RIMM) and Siemens.

We believe WPP Group lays a lot of emphasis on new markets, new media and consumer insights, as is evident from the acquisition of Marketing Direct. The company has a dominant market share in many areas and has the pricing power to improve margins and sustain future profit growth. Moreover, revival in the global economy has enhanced advertising spending by companies across the world.

Global advertising expenditure is expected to be approximately $502 billion in 2011, representing an increase of 5.8% over $474 billion in 2010, according to a report by GroupM. Expenditure in the U.S. is expected to be roughly 29.4% of the global forecast, an increase of 3.7% over $142.5 billion in 2010.

Hill & Knowlton, one of the largest public relations & public affairs worldwide, provides integrated programs locally or globally to its clients.

WPP Group faces competition from its peers like Interpublic Group of Companies, Inc. (IPG), Omnicom Group Inc. (OMC), and Publicis Groupe SA (PUBGY.PK).

We currently maintain an Outperform recommendation on the company.