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Which is it? A media story or a beneficial alliance.

Musammil,    11 Aug 2009

Microsoft has been looking to sell Razorfish, the digital agency it acquired through its $6 billion purchase of ad services holding company aQuantive in 2007. Publicis Groupe, the world’s second largest media agency, finally sealed the bid to buy Razorfish for $530 million in cash and stock.

In an economic climate where sustaining and growing revenues is in itself a question mark, it is probably a very welcome and strategic deal for Razorfish to be valued at 1.4 to 1.5 times its annual revenue.

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It is equally strategic for Publicis, with the agreement calling for Microsoft to spend a certain amount with Razorfish. While there may be many discussions around this sale being a costly one for Microsoft, Microsoft also got itself a portion of the pie through the agreement calling for Publicis to buy display and search advertising on Microsoft properties like MSN.com and Bing, its new search engine. Publicis’s agreement to spend the specified amount on ad space in the Microsoft digital properties is what won them the bid against WPP and Dentsu.

Maurice Levy, Chairman and CEO of Publicis Groupe, must be a happy man today. In a press release, he stated that this deal is “another step forward in realizing our strategic vision of building a world leader in digital communications, a critically important space for our clients.”

What this strategic alliance amounts to will have to be seen in time, as is the case with such mergers and acquisitions promising strategic benefits.

6 Comments

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