After the battle: GfK looks to the future

GERMANY-- GfK is trumpeting its continued successful performance, despite losing to WPP in the race to buy TNS.

The German agency said it is “defying the financial crisis to benefit from the lower volatility of the market research industry”. It is well on the way toward its full-year targets, with bookings for 91.6% of its forecasted sales secured by the end of September.

The firm has received a £10.6m break fee after WPP secured acceptance from 82% of TNS shareholders for its buyout bid. The sum fully offsets the cost of the aborted merger negotiations, GfK said in a statement today.

The agency's plan for a nil-premium merger with TNS was scuppered by WPP's rival bid, and it failed to raise the capital needed for an all-cash offer of its own.

Research spoke today to GfK NOP's head of custom research, Phyllis Macfarlane, and asked her what the deal means for GfK and the industry as a whole.

GfK lost the race for TNS. Where does that leave the company?

Obviously we're disappointed that we didn't get TNS. We thought we made a good offer, and we thought it was a creative thing to do, and I think it would have been a very successful merger. Having not got it, we obviously have to wait and see how WPP positions TNS within the Kantar group, which will be interesting.

How will the WPP-TNS deal affect the wider MR scene?

It's almost impossible to say. If the companies are run as separate brands, there won't be much change in the UK market. If there are major restructurings, then there will be fall-out in the short term of people and clients. So we're keeping a close eye on the situation.

WPP-TNS will be the second biggest research business after Nielsen. How do you feel about having a much larger competitor?

In the UK we've always had TNS, which is bigger than us, and WPP, which is also bigger than us if you add all the research businesses up. I don't feel like there's a big major market share competitor in the UK, I feel as though there are a good handful of big agencies that compete on a similar basis. So if they're run as separate brands, I don't think we'll feel that a 10-ton gorilla is breathing down our neck.

They will be hoping to achieve synergies that you won't be able to.

In theory. Synergies take a long time to realise. It's taken WPP many years to rationalise the back offices of the businesses they have, so I doubt whether they'd suddenly put everything together. We all do a different mix of work and our operations are geared up for that.

How do you think clients will respond?

Clients like to have a spread of agencies, so on that basis you would expect that the other agencies will get some benefit.

Do you see this as an opportunity to find new talent?

Yes, we're always looking for good people. WPP should try to hold on to its good people, of course, but it will be interesting if there are some good people who don't want to go through the merger.

What about other options for GfK to consolidate?

I can't comment on that.

What's the general economic outlook like for research at the moment?

It certainly looks like 2009 will be the year when we find out if MR really is recession-proof. At the moment it's impossible to say. Everyone is nervous, no one wants to predict anything, but every month that passes is reasonably OK. All those things we've always told the analysts are still true: clients will still need data, and even more so as their markets become more competitive, so market research should be less affected than other industries.

Author: Robert Bain