A series of buyout funds including US firms Advent and Blackstone are in talks with advertising group WPP to explore bids for a majority stake in its data analytics unit Kantar.
The sale, led by Goldman Sachs, may value Kantar at up to £3.5bn, but some private equity investors are fretting over the decline in profits and revenues that the business has suffered in recent years.
Hellman & Friedman and CVC Capital Partners are also working on the deal, according to sources, while industry players have so far shied away from the process.
Bain Capital has also expressed interest in making a bid for Kantar, another source said, adding Bain might later decide to team up with one of the other buyout funds in the race.
WPP sent out confidential information packs this week, with non-binding offers expected in April, a source said.
WPP, the owner of agencies including JWT, Finsbury and Ogilvy, is in the middle of an overhaul launched by its new boss Mark Read following several profit warnings in 2017 and 2018.
The London-based group wants to sell a majority stake in Kantar to reduce debt as it braces for a tough year with revenue expected to drop by between 1.5% and 2% in 2019.
Kantar, a leading player in market research, provides brand and marketing communications research for some of the world’s largest advertisers. Yet it has suffered a decline in revenue in recent years, with underlying sales down 2% last year to £2.6bn and operating profit down 14% to £301m.
“The deal poses some challenges for private equity funds as it’s been on a downward trajectory for a while,” one source said.
Private equity investors are examining the turnaround potential of a possible deal, the sources said, and would value the business at up to 10 times its earnings before interest, tax, depreciation and amortisation, oe Editda, hoping to reignite growth within the first three years of their investment.
Liberum analyst Ian Whittaker said in February that Kantar could fetch more than £3bn, with WPP raising close to £2.1bn to £2.2bn from a 60% stake sale. WPP boss Mr Read aims to complete the sale by the end of the summer as he needs cash to steer the world’s biggest advertising group back to growth.