NEW YORK (TheStreet) -- Sometimes being large is a disadvantage. Innovation takes time. Getting all parts of a sprawling company to work together, let alone adapt to critical changes, isn't easy. It may be impossible.
Advertising agencies, especially large firms such as Paris-based Publicis Groupe (PUBGY) are a case in point. Publicis, with annual revenue of $6.9 billion, was hoping that an outsized $35 billion merger with New York-based Omnicom Group (OMC) would provide the energy to remake the company for the digital era. But that deal blew up in May amid a hail of doubts about the costs and likelihood of merging two very large corporations with very different work cultures and languages.
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As of Monday, Publicis is officially seeking to do the same but on a smaller scale. The French ad agency said it will spend $3.7 billion in cash to acquire Boston-based digital advertising Sapient (SAPE) at a cost of $25 a share. The move is bold, not because of the money involved, but because of what it says about Publicis.
Watch the video below for more on the Publicis-Sapient deal:
So far, Publicis' investors don't like the deal: The company's American Depositary Shares traded in New York were falling 2.8% to $16.84, extending their 2014 decline to a whopping 27%. Sapient, of course, is surging, up 42% to $24.62, but who doesn't like to be acquired at a monster premium?
As for Publicis, the company already owns three high-profile, digitally focused advertising agencies: Rosetta, Razorfish and DigitasLBi. Publicis doesn't have a great track record, however, of assimilating acquired companies to boost revenue or profits. In March it bought Dallas-based Hawkeye, and last year it acquired a majority stake in London-based Walker Media. In recent years, Publicis bought Amsterdam-based Lbi for $540 million and Hamilton, N.J.-based Rosetta for $575 million.
"That Publicis has been more aggressive in buying digital agencies than its peers has not helped its growth rate relative to peers," Pivotal Research Group analyst Brian Wieser said in an investor note Monday. "The risk that growth slows at Sapient is one of the transaction's more important considerations."