WPP has snapped up scores of companies around the world on the way to becoming the second-largest advertising and public relations group. Group chief executive Sir Martin Sorrell took a stake in wire baskets manufacturer Wire & Plastic Products (WPP) in 1985, and WPP has since made a name by acquiring Madison Avenue's top advertising agencies Ogilvy & Mather, J. Walter Thompson and Densu Young & Rubican. So, it is no surprise that acquisitions are a major part of the China strategy of the London and Nasdaq-listed advertising giant. WPP entered China in 1987 when it acquired J. Walter Thompson, which included Hill and Knowlton, the first foreign public relations firm to establish a presence in China, in 1984. At first, London-based WPP followed its multinational corporation clients, which include 300 on the Fortune 500 list, into China. Today, multinationals account for 60 per cent to 70 per cent of WPP's China clients. But as WPP found out during the most recent global economic downturn, depending heavily on American and European companies is not a good thing. WPP's goal over the next three to five years to raise the ratio of Chinese companies to 50 per cent from 30 per cent today. WPP's roster of mainland clients include 999 Pharmaceutical, Bank of China and Guangdong Development Bank. 'To crack China, most of the local companies, whether it is [state-owned enterprises] or private ones, are still using local agents these days. So a key strategy for the next few years is really to grow that sector of local clients,' said William Lo, the newly appointed chairman of WPP Greater China. One way to expand WPP's client base in China is through the joint ventures it already has there. Ogilvy & Mather and J. Walter Thompson have joint ventures in Shanghai. The other way to is to take a minority stake or acquire domestic public relations firms, advertising agencies and market research companies. 'Over the last few years, we have already acquired a few small firms. All local firms - very small ones, though. We are still at the early stage of our acquisition spree inside China,' Mr Lo said. 'But at the moment, we have quite a few in the pipeline we are talking to, we are doing due diligence, etcetera.' WPP has hired Merrill Lynch, Goldman Sachs and HSBC to handle its mergers and acquisitions globally. Their Chinese acquisitions are likely to be small domestic companies for which payment can be financed internally. Part of the reason for the slimmer pickings is the fact that the sectors WPP is looking at, such as public relations, are still in their infancy. According to a China International Public Relations Association (Cipra) survey released last Thursday, China's public relations industry revenues totalled two billion yuan (about HK$1.8 billion) last year. WPP's profit before goodwill, interest, tax, investment gains and write downs totalled US$808 million for last year, more than three times China's total public relations industry revenues. Also, transnational advertising or public relations companies are few and far between in China. 'The China market is a very fragmented market at the moment. There are a lot of firms, there are a lot of very small firms. Seldom will you see local firms which span China,' Mr Lo said. But WPP is not dissuaded from acquiring companies just because they are small. In Sir Martin's words: 'We don't necessarily want to be the biggest. We want to be the best.' It may, however, be put off by the quality of local firms. In addition to building up a strong domestic clientele, WPP is looking closely at the employees of the potential acquisition target. 'When you buy a company, you are paying for the company's current resources. But in reality, the people may change [after the acquisition] and you lose your original market and clients,' Cipra director of development John Chen said. 'So, there have been successful cases [of acquiring local PR firms] and unsuccessful cases. 'Acquiring a firm in China is not always the best way,' he said.