Acquisitions (Notes)

12 Months Ended

Dec. 31, 2011

Business Combinations [Abstract]

Acquisitions

Acquisitions

We continue to evaluate strategic opportunities to grow and to increase our ownership interests in current investments, particularly in our digital and marketing services offerings, and to expand our presence in high-growth and key strategic world markets. Our acquisitions typically provide for an initial payment at the time of closing and additional contingent purchase price payments based on the future performance of the acquired entity. In addition, we have entered into agreements that may require us to purchase additional equity interests in certain consolidated and unconsolidated subsidiaries. The amounts at which we record these transactions in our financial statements are based on estimates of the future financial performance of the acquired entity, the timing of the exercise of these rights, changes in foreign currency exchange rates and other factors.

For acquisitions that were completed on or after January 1, 2009, we record deferred payment and redeemable noncontrolling interest amounts on our Consolidated Balance Sheets based on their acquisition-date fair value. Deferred payments are adjusted quarterly based on their estimated fair value with any changes impacting operating income. Deferred payments are recorded on a discounted basis and the related accretion expense is recognized in operating income between the acquisition date and the deferred payment date. Redeemable noncontrolling interests are adjusted quarterly with any changes impacting additional paid-in capital or retained earnings. See Note 14 for further information on contingent acquisition obligations. For acquisitions completed prior to January 1, 2009, contingent acquisition obligations were not recorded on our Consolidated Balance Sheets until the obligation was satisfied and consideration was determinable and distributable. At that point, we recorded the fair value of this consideration as an additional cost of the acquired entity. Certain acquisitions contained deferred payments that were fixed and determinable on the acquisition date. In such cases, we recognized this consideration as an additional cost of the acquired entity on the acquisition date and recorded a liability for the future payment.

The following table presents changes in our redeemable noncontrolling interests.

	Years ended December 31,
	2011			2010			2009
Balance at beginning of period	$	291.2		$	277.8		$	288.4
Change in related noncontrolling interest balance	(7.7		)	1.5			2.5
Changes in redemption value of redeemable noncontrolling interests:
Additions	17.9			31.9			0.5
Redemptions and reclassifications	(70.7		)	(30.1		)	(5.3		)
Redemption value adjustments 1	12.7			10.1			(8.3		)
Balance at end of period	$	243.4		$	291.2		$	277.8

¹  Redeemable noncontrolling interests are reported at their estimated redemption value in each reporting period, but not less than their initial fair value. Any adjustment to the redemption value impacts retained earnings or additional paid-in capital, except adjustments as a result of currency translation.

During 2011, we completed twenty-two acquisitions, which included purchases of controlling interests in previously unconsolidated subsidiaries. Of these acquisitions, eighteen are included in the Integrated Agency Networks (“IAN”) operating segment and four are included in the Constituency Management Group (“CMG”) operating segment. All acquired agencies have been integrated into one of our global networks or existing agencies. The most significant acquisitions included full service creative agencies in Australia, a public relations firm in Brazil, digital and direct marketing agencies in the United Kingdom, a healthcare communications firm in Germany and a social media agency in the United States. During 2011, we recorded approximately $133.0 of goodwill and intangible assets related to these acquisitions during the year.

During 2010, we completed five acquisitions, of which four were included in the IAN operating segment and one was included in the CMG operating segment. The most significant acquisitions included a premier full-service communications agency in the United Kingdom and a media and digital marketing service company in Brazil. During 2010, we recorded approximately $63.0 of goodwill and intangible assets related to these acquisitions during this period.

During 2009, we completed two acquisitions, both of which were included in the IAN operating segment.

For companies acquired, we make estimates of the fair values of the assets and liabilities for consolidation. The purchase price in excess of the estimated fair value of the tangible net assets acquired is allocated to identifiable intangible assets and goodwill. Due to the characteristics of advertising, specialized marketing and communication services companies, our acquisitions typically do not have significant amounts of tangible assets, as the principal asset we typically acquire is creative talent. As a result, a substantial portion of the purchase price of these acquisitions is allocated to identifiable intangible assets, primarily customer lists and trade names, and goodwill.

For all of our acquisitions, if deferred payments and purchases of additional interests after the effective date of purchase are contingent upon the future employment of the former owners, then we recognize these payments as compensation expense. Compensation expense is determined based on the terms and conditions of the respective acquisition agreements and employment terms of the former owners of the acquired businesses. This future expense will not be allocated to the assets and liabilities acquired and is amortized over the required employment terms of the former owners.

The results of operations of our acquired companies were included in our consolidated results from the closing date of each acquisition. We did not make any stock payments related to our acquisitions in 2011, 2010 or 2009.

Details of cash paid for current and prior years' acquisitions are listed below.

	Years ended December 31,
	2011			2010			2009
Cost of investment: current-year acquisitions	$	48.0		$	47.1		$	3.8
Cost of investment: prior-year acquisitions	105.1			49.6			74.6
Less: net cash acquired	(18.5		)	(5.3		)	(0.1		)
Total cost of investment 1	134.6			91.4			78.3
Operating expense 2	0.5			3.0			0.0
Total cash paid for acquisitions	$	135.1		$	94.4		$	78.3

¹  Of the total cash paid, $71.5, $29.5 and $5.9 for the years endedDecember 31, 2011, 2010 and 2009, respectively, are classified under the financing section of the Consolidated Statements of Cash Flows within acquisition-related payments. These transactions relate to increases in our ownership interests in our consolidated subsidiaries as well as deferred payments for acquisitions that closed on or after January 1, 2009. Of the total cash paid, $63.1, $61.9 and $72.4 for the years endedDecember 31, 2011, 2010 and 2009, respectively, are classified under the investing section of the Consolidated Statements of Cash Flows within acquisitions, including deferred payments, net of cash acquired. These transactions relate to initial payments for new transactions and deferred payments for acquisitions that closed prior to January 1, 2009.

²  Represents cash payments made that were either in excess of the contractual value or contingent upon the future employment of the former owners of acquired companies.