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Advertising group WPP is nearing a deal to sell its controlling stake in financial communications company FGS Global to private equity group KKR for about $800mn.
WPP could announce the deal as early as Wednesday when the group is due to report its next financial results, according to three people close to the talks.
Under the terms of the deal being discussed, WPP will sell its 50.5 per cent stake in FGS for about $800mn, giving the communications business an overall valuation of about $1.6bn. KKR will take its stake from about 30 per cent to about 80 per cent, with the company’s hundreds of partners and management holding the remainder.
Those close to the deal said it was important for partners to continue to own some of the equity as an incentive to stay. However, they cautioned that the deal had not yet been signed-off on Tuesday. WPP declined to comment. KKR did not immediately respond to requests for comment.
FGS — which was formed through the merger of London-based Finsbury, Frankfurt-based Hering Schuppener and Washington DC-based Glover Park Group — has close to 30 offices around the world serving more than 1,600 clients. The group generated about $450mn last year in revenue, making about $95mn in earnings before interest, tax, depreciation and amortisation.
By purchasing FGS, KKR is betting that it can continue to expand the business and find an exit opportunity in the coming years either to a buyer or to the public markets.
The financial communications industry has been undergoing a wave of consolidation as once domestic-focused businesses look to pool together services and provide comprehensive coverage to their roster of top business executives, corporations and financial groups.
However, not all deals have proven smooth with investments complicated by their reliance on star communications advisers who can bring in big accounts.
For example, private equity group CVC has faced difficulties with its 2019 investment in FGS rival Teneo after a series of scandals led to two of its three founders departing abruptly within months of each other during the pandemic.
The sale of FGS will be the first struck since the WPP chose Philip Jansen as its new chair last week. The move, which was first reported by the Financial Times, is expected to lead to fresh analysis of the future strategy of the company by Jansen, who has a long record of corporate activity at BT and Worldpay.
The deal will be a boost to the financial position of the advertising network, which has come under scrutiny in recent months given its relative underperformance compared with rivals such as France’s Publicis.
But the deal will also revive talk about whether WPP’s share price is trading at a level that reflects the full sum of its various businesses, which span media, marketing, PR and advertising around the world.
Increasingly, WPP is also positioning itself as a tech-focused company, employing artificial intelligence tools and data-led services for its clients to target specific groups of customers and to create campaigns faster and with greater effectiveness.
Those close to the talks said that FGS had become increasingly seen as non-core to the agency network, which already owns Burson, one of the world’s largest PR firms that comprises BCW and Hill & Knowlton under Corey duBrowa, former communications chief at Google. Other agencies within the network such as Ogilvy also offer PR services to their clients.
The FT revealed earlier this year that KKR had made an approach to take majority control of FGS. The private equity group acquired about 30 per cent of the business in a deal that valued Finsbury at close to $1.5bn in 2023. WPP remained the company’s majority owner under the deal, with about 50.5 per cent of the equity, with FGS employees owning the remainder.
The deal might also delay plans to float the business in the next two years. Goldman Sachs has been advising WPP on the situation.
