Dive Brief:

• WPP is merging agencies J. Walter Thompson and Wunderman together to create a new entity called Wunderman Thompson, Adweek reported. WPP confirmed the move in a news release and revealed it to employees today (Nov. 26), though it's been rumored in the industry for weeks, sources told Adweek.
• The new, combined group will be based in JWT's headquarters in Manhattan, and employ 20,000 people in 200 locations serving 90 markets around the globe. JWT, which is the oldest ad agency in the world, already shares several high-profile clients with Wunderman, including Shell, Nestlé and Johnson & Johnson, and the two had been working more closely together in recent months, sources told Adweek. Wunderman was formed 60 years ago as the first direct marketing agency but now specializes in digital capabilities, such as the increasingly important field of data analytics.  
• Mel Edwards, who took over as Wunderman's CEO in September after her predecessor Mark Read stepped up to lead WPP, will be global chief executive of Wunderman Thompson. Tamara Ingram, JWT's CEO, will serve as chairman. WPP is expected to introduce new branding for Wunderman Thompson in the coming days, Adweek said. 

Dive Insight:

The merger of JWT and Wunderman encapsulates both WPP's ongoing realignment strategy to restore growth and also a broader shift happening in the agency space. JWT is a legacy shop responsible for iconic campaigns and advertisements dating back to the Ford Model T, per Adweek, but brand clients today are demanding more of a focus on data from their agency partners, which is an area where Wunderman performs well.

Indeed, Wunderman is now considered "the darling of WPP," an anonymous source with close connections to the agency told Adweek, and will likely be leveraged to assist JWT's above-the-line creative offerings going forward, another source said. In a press statement, Wunderman CEO Edwards emphasized the industry's need for "data-driven insight" and positioned Wunderman Thompson as specialized in those areas and with complex technology. Agencies have frequently struggled with digital disruption, with outside competitive threats like consultancies snapping up more client business in recent years.   

The news marks the second major consolidation to occur under Read, who took the helm of WPP in September after founder and longtime CEO Martin Sorrell's controversial resignation. That month, the ad holding group announced plans to combine agencies Young & Rubicam and VML to form a new agency called VMLY&R. As is the case with the latest merger, the move combined a traditional creative shop, Young & Rubicam, with a more digitally-oriented one in VML. The transition was met with a bit of a rocky start when VMLY&R just a few weeks later lost PepsiCo as a client, an account that brought in an estimated $50 million in billings.

WPP, which owns the largest agency network in the world, will likely continue to consolidate its agency offerings as it attempts to improve performance and agility in a tough market for growth. The company saw like-for-like organic sales slip 1.5% compared to the 0.3% in growth forecast by analysts for Q3, sending its shares tumbling.

Outside of streamlining some offerings, WPP may sell off underperforming properties. It's currently reviewing strategic options for its data and market research division Kantar.