Posted August 10, 2009 9:38 am by with 3 comments

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In a Razorfish sale, yet to be officially confirmed, both Microsoft and French ad firm Publicis look set to walk away winners.

Microsoft looks set to recoup $530 million of the $6 billion it paid to acquire aQuantive and, along with it, Razorfish.

Publicis beefs-up its online advertising offering, picks up Microsoft, McDonalds, Google, and Yahoo as clients, and celebrates its 1-year anniversary of acquiring Performics with another big acquisition.

This should be Publicis’ last big-fish acquisition for a while, according to CEO Maurice Levy, "Don’t expect any acquisitions of this magnitude in the short or medium term." Now Publicis has to figure out how to integrate Razorfish, without losing any of the marquee client accounts, and hope that it can turn around a decline in revenue during the first half of 2009.

Here are the key details:

  • Publicis will hand over 6.5 million existing shares of the company to Microsoft.
  • The remaining $300 million will be paid in cash. Not sure if that’s in dollars, euros, or monopoly money.
  • Assuming the deal doesn’t get tripped-up by regulators, Microsoft will own 3% of Publicis.
  • Razorfish will contribute about $380 million in revenue to Publicis. That may just be "ad spend" which would put Razorfish’s net revenue in the $25 to $50 million range.
  • Razorfish’s 2,000 employees will now enjoy an additional holiday each year–OK, maybe I made that part up! 😉
  • I think this is going to be true of a lot of agencies (not just the biggest ones) who have purchased smaller agencies in the last 12 – 18 months. Some agencies sold for big bucks only to hurt their new owners due to the economic slowdown, lost clients, and the reduction in advertising revenue. The agencies that will be truly success are those that can offer valuable services that are imbedded into the workflow of some of these larger companies. When the economy turns around, they will certainly have the upper hand.

  • That original revenue figure of $380M seems more realistic b/c that puts Razorfish ~$190K per employee. If you look at other acquisitions in the Interactive space over the past 3-5 years most firms with more $10M in sales look to avg $175K – $300K annual revenue per employee. If it were only $50M in revenue with 2,000 employees — they would’ve been out of business years ago. As you pointed out, some firms certainly bloat top line revenues via ad spend flowing through their agency, but don’t think that is the case here.

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