Wpp Plc · LSE:WPP
Wpp — Merger or Acquisition (May 2007)
39 slides from Wpp's merger presentation, May 17, 2007
Slide 1: WPP Acquisition of 24/7 Real Media
WPP Acquisition of 24/7 Real Media May 17, 2007 1
Slide 2: Forward Looking Information
Forward Looking Information • This announcement includes statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including inter alia the terms "believes", "plans", "expects", "may", "wil
Slide 3: Agenda
WPP 1 Overview of 24/7 Real Media 2 Strategic Rationale 3 Key Deal Terms and Impact on WPP 4 Conclusion 3
Slide 4: Overview of 24/7 Real Media
WPP 1 Overview of 24/7 Real Media 4
Slide 5: Company Overview
24/7 Real Media Company Overview • Leading global digital marketing company, founded in 1995 • 2006: $200 million revenue (43% organic revenue growth), $19.6 million EBITDA1 (101% growth), $15.1 million cash flow from operations • 400+ employees across 20 offices in 12 countries – 61% of revenues ou
Slide 6: Global Digital Marketing Solutions
Global Digital Marketing Solutions Key Digital Marketing Technologies and Skills Online Content ROI Optimization IPTV Yield Management Mobile Devices Conversion Video Games Rich Media Data Management and Analysis Video Ads Behavioral Targeting Search Search Re-Targeting 6
Slide 7: Segment Overview
24/7 Real Media Segment Overview1 Total 2006 Revenue: $200.3m Media Technology ’06 Revenue Share = 42.3% ’06 Revenue Share = 14.6% T echnology ’06 Gross Profit Share = 38.6% ’06 Gross Profit Share = 32.3% Solutions YoY Growth = 30% YoY Growth = 27% $29.2m Est. Global Market = $9.1b Est. Global Marke
Slide 8: Search Solutions
Search Solutions • Market Position – Able to interface with every major search engine in every global search market – Decide DNA rated “highest among SEM platforms" by JupiterResearch –2 nd time consecutively – JV with Dentsu in Japan and expanding in Asia – Key Markets: US, Japan, UK and Australia
Slide 9: Media Solutions
Media Solutions • Market Position – 24/7 Web Alliance consisting of 950 quality publishers – Reach of over 115 million unique visitors each month – Branding and Direct Marketer Advertisers – One of the few CPM only networks – Key Markets: US, Korea, Canada and UK • Competitive Advantages – Internati
Slide 10: Technology Solutions
Technology Solutions • Market Position – Powers the 24/7 Web Alliance, a network of 950 quality publishers – Licensed by 400 clients, serving over 1000 websites – Available in either enterprise and hosted solutions – Key Markets: North America, Europe and Asia • Competitive Advantages – Agnostic Ope
Slide 11: Capitalizing on Global Growth
Capitalizing on Global Growth North America Europe Pacific Rim Offices: 9 8 3 % of Q4 2006 Rev: 50% 35% 15% Est. Market Growth1: 20-25% 25-30% 30-35% ¹ PricewaterhouseCoopers LLP, “Global Entertainment and Media Outlook: 2005-2009”, June 2005 11
Slide 12: Financial Performance
24/7 Real Media Financial Performance $’m 2004 2005 2006 CAGR Actual Actual Actual 2004-2006 % Revenue Media 49.9 65.4 84.9 30.4% Search 16.5 51.4 86.2 128.6% Technology 18.9 23.0 29.2 24.3% Total 85.3 139.8 200.3 53.2% Direct Costs (49.3) (83.3) (128.9) Gross Profit 36.0 54.5 71.3 40.7% “Cash” EBIT
Slide 13: Strategic Rationale
WPP 2 Strategic Rationale 13
Slide 14: Online Advertising Growing Quickly
Online Advertising Growing Quickly Increasingly Important to Our Clients Global Online Advertising Revenue (dollars in billions and % of total ad spend) 7% $63.4 R=2 e d CAG r P r oject $52.5 5Y $43.8 $33.4 13.2% 11.5% $26.3 10.0% $19.5 8.1% 6.6% 5.2% 2005 2006E 2007F 2008F 2009F 2010F Source: Group
Slide 15: High Growth Expected to Continue
High Growth Expected to Continue Internet usage is expected to experience strong growth even in mature markets such as the U.S. US Media Expected Growth 2005-2009 Time and Money 100% 4% 15.0% 17% 14% 10% 3% 10.0% Web 75% 2% 17% 19% News 5.0% 6% 1% Mags 0% 0% 50% 0.0% Radio TV (5.0)% (3)% 59% 59% 25%
Slide 16: Digital Revenues Growing Part of WPP's Business
Digital Revenues Growing Part of WPP’s Business Proforma WPP Digital Revenues $3,000 (US $million) 2,317 $2,500 (21%) $2,000 $1,500 974 700 (9%) $1,000 (15%) 300 $500 (7%) $0 2000 2006 PF Digital Marketing Digital and Direct Networks 16
Slide 17: Digital Has Been Significant Area of Focus
Digital Has Been Significant Area of Focus Major Recent Acquisitions and Investments • Search: Catalyst (SEM/SEO), Global Strategies International, Quisma • LongTail: Spot Runner • Social Networks: LiveWorld, VisibleTechnologies, M80 • Video Gaming: WildTangent • Mobile: mMetrics (Research), JumpTap
Slide 18: Digital Industry Landscape
Digital Industry Landscape Advertiser $1.00 Agency $0.15 - $0.18 Ad Network (24/7, ad.com, ValueClick) $0.05 - $0.40 Ad Server & Technology (Atlas, DoubleClick, 24/7, AdTech) $0.01 - $0.02 Publisher Comparison Engines Search Engines Other (Yahoo, NYTimes, (Shopping.com) (Google, Yahoo, MSN) (eg, Mob
Slide 19: Changing Digital Market
Changing Digital Market • Accelerating shift to digital media – all media going digital • Effective digital marketing requires technology to connect our clients with consumers – Measurability: Greater availability and complexity of data – Addressability: Ability to deliver much more targeted audienc
Slide 20: Combination Brings Critical Success Factors
Combination Brings Critical Success Factors Long-term sector winners will require several key attributes to compete effectively in the evolving global media and advertising market • Scale • Breadth of products • International coverage • Experienced management and people • Strong technology 20
Slide 21: Why 24/7 Real Media?
Why 24/7 Real Media? • Acquisition adds strong technology assets, people and development capabilities to WPP for the first time – Working with 24/7 Real Media on technology JV for past 12 months – Ability to develop media technology platforms for use across WPP • Technology assets and skills in 24/7
Slide 22: Technology Overview
24/7 Real Media Technology Overview Technology drives innovative advertising and search marketing strategies connecting advertisers with consumers. 22
Slide 23: Technology Assets
24/7 Real Media Technology Assets Open AdStream Decide DNA • Awards • Awards – AdTech’s Best Interactive – Rated highest among SEM Marketing technology platforms by JupiterResearch • Convergence: Only ad server – European Seal of Excellence that integrates analytics • Interfaces with every major • D
Slide 24: Key Management
24/7 Real Media Key Management Name Position Experience David J. Moore Chairman and CEO • Former President, Petry Interactive • Former President, Geomedica • Former Group VP, Hearst/ABC-Viacom Entertainment • Serves as Board member on the Internet Advertising Bureau Jonathan Hsu EVP, COO and CFO • F
Slide 25: Organisational Structure/ Management Roles
Organisational Structure/ Management Roles • Key management support the deal and committed to future joint development • Unvested stock compensation rolled over into WPP equivalents • 24/7 Real Media report in to WPP as separate company within WPP Digital • Key task to collaborate across the Group,
Slide 26: Marketing Services To Be Two Thirds of Total Group
Marketing Services To Be Two Thirds of Total Group Today¹ Today including 24/7 Real Media¹ Tomorrow 33% 48% 47% 53% 67% 52% Advertising & Media Investment Management Marketing Services ¹ Based on full year 2006 revenue 26
Slide 27: Quantitative Disciplines To Be One Half of Total Group
Quantitative Disciplines To Be One Half of Total Group Today ¹ ¹ Today including 24/7 Real Media Tomorrow 33% 50% 34% 67% 66% 50% Information, Insight & Consultancy and Direct, Internet & Interactive Advertising, Media Investment Management & Other Marketing Services 27 ¹ Based on full year 2006 rev
Slide 28: Key Deal Terms and Impact on WPP
WPP 3 Key Deal Terms and Impact on WPP 28
Slide 29: Key Deal Terms
Key Deal Terms Transaction Value $649m including $637m of vested and $49m of unvested share capital less estimated cash at closing of $37m Price $11.75 per 24/7 Real Media share Funding Net cash consideration of $600m funded from WPP’s existing resources Other Unvested Stock Options and Restricted S
Slide 30: 24/7 Real Media Outlook
24/7 Real Media Outlook ($’m) 2006 2007 1 2008 1 Actual $M Consensus $M Consensus $M Revenue: 24/7 Reported 200 268 331 WPP Reported2 135 161 199 Cash EBITDA3 20 32 40 EBITDA (1) 20 26 EBIT (5) 12 19 EBIT Margin n/m 7.3% 9.5% 1 Based on reports from Piper Jaffray, Jefferies, ThinkEquity, Stanford Gr
Slide 31: Valuation at Deal Price
24/7 Real Media Valuation at Deal Price1 Multiples of Cash Consideration 2007 2008 Revenue: 24/7 Reported 2.2x 1.8x WPP Reported 3.7x 3.0x “Cash” EBITDA2 19x 15x EBITDA 31x 23x 1 Based on Consensus 2 EBITDA before “Non-cash” stock compensation 31
Slide 32: Illustrative Financial Impact
Illustrative Financial Impact 2006 Proforma Historic margin diluted by ca 10 bpp £’m WPP1 TFSM2,3, Combined Revenue 5,908 73 5,981 EBITDA 1,002 3 1,005 Headline EBIT 859 1 860 Margin 14.5% 1.7% 14.4% 1 WPP Headline EBIT is EBIT before goodwill and intangibles charges, investment gains and share of e
Slide 33: Illustrative Financial Impact: Margin Targets
Illustrative Financial Impact Margin Targets Operating Margin % 2006 2007 2008 (Actual) (Combined) (Combined) WPP Actual/Target1 14.5% 15.0% 15.5% 24/7 Real Media 1.7%2 7.3%3 12.0%4 Consensus Combined 14.4% 15.0% 15.5% • 24/7 Real Media will no adverse impact on Group tax rate • Acquisition will be
Slide 34: Illustrative Financial Impact: Funding of Consideration
Illustrative Financial Impact WPP Funding of Consideration Offer at $11.75 per Share $’m Basic Shares 604 Vested Options and Warrants 33 Consideration for vested share capital 637 Estimated Net Cash on closing1 (58) Repayment of Convertible 21 Cash Cost 600 Unvested Options and Restricted Stock roll
Slide 35: Average Debt/EBITDA
Average Debt/EBITDA £ million Average debt/ EBITDA 1,800 average debt 2.75 Average debt pre-24/7 EBITDA 1,600 average debt/EBITDA pre-24/7 2.50 1,400 average debt/EBITDA post-24/7 2.25 1,200 1,000 2.00 800 1.75 600 1.50 400 1.25 200 0 1.00 2000 2001 2002 2003 2004 2005 2006 2007 2008 35
Slide 36: Expected Timing
Expected Timing Deal signing Completed 0 Launch of Offer 10 days 10 First Acceptances 30 days 40 Regulatory approvals required 30 - 60 days 70 Estimated completion: End July 36
Slide 37: Conclusion
WPP 4 Conclusion 37
Slide 38: Conclusion
Conclusion • Acquisition of 24/7 Real Media is in-line with all 3 of our strategic objectives • Strengthens our position in the fast-growing digital marketing sector • Gives WPP – Access to 24/7 Real Media’s technology assets, people and development capabilities – More scale in the critical SEM area
Slide 39: Important Information
Important Information This announcement is for informational purposes only and is not an offer to buy or the solicitation of an offer to sell any of the 24/7 Real Media common shares. The tender offer described herein has not yet been commenced. On the commencement date of the tender offer, an offer