To strengthen its foothold in the healthcare sector, advertising titan WPP Group Plc (WPPGY), via KBM Group, has agreed to acquire Marketing Direct Inc, a US-based integrated marketing services company. Completion of the transaction is subject to regulatory and Marketing Direct Inc.'s shareholders' approval.

Based in St Louis, Missouri, Marketing Direct employed roughly 64 people and reported revenue of $16.9 million for the year ended December 31, 2009 with gross assets of $7.3 million. The company specializes in strategy, design and execution of marketing campaigns, particularly in the healthcare sector. Further, it engages in direct and interactive marketing services to healthcare and insurance providers.

We believe WPP Group lays a lot of emphasis on new markets, new media and consumer insights, as is evident from the acquisition of Marketing Direct. The company has a dominant market share in many areas and has the pricing power to improve margins and sustain future profit growth. Moreover, revival in the global economy has improved advertising spending by companies across the world.

Global advertising spending is expected to be approximately $502 billion in 2011, representing an increase of 5.8% over $474 billion in 2010, according to a report by GroupM. Expenditure in the U.S. is expected to be roughly 29.4% of the global forecast, an increase of 3.7% over $142.5 billion in 2010.

KBM Group is a global leader in knowledge-based marketing solutions, providing strategic consulting, digital services, database services, analytics, marketing management, response services, data and marketing outsourcing.

WPP Group faces competition from its peers like Interpublic Group of Companies, Inc. (IPG), Omnicom Group Inc. (OMC), and Publicis Groupe SA (PUBGY.PK).

We currently maintain an Outperform recommendation on the company.