Zacks_Analysts' Blog : TNS to Acquire Research and Marketing - Analyst Blog

Advertising titan WPP Group Plc (WPPGY), through its TNS network (a part of Kantar), entered into a definitive agreement to acquire the major stake holding in African custom research network, Research and Marketing Services group of companies.

Research and Marketing Services specializes in providing in-depth knowledge of the African market in market and social research having operations spread over the West and Central Africa. The company provides services in sectors including consumer goods, financial services, telecoms and social research. Its key client base comprises Cadbury, Coca-Cola, Diageo, Heineken, MTN, Nigerian Breweries and Unilever.

Research and Marketing Services employs over 225 people and reported consolidated revenue of approximately $12.6 million for the year ended 31 December 2009. Gross assets were roughly $7.7 million.

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.

Kantar, one of the largest insight, information and consultancy networks, provides insights for the global business community.

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

We currently maintain an Outperform recommendation on the company.