Several of the smaller holding companies could become targets, including True North Communications, the Chicago parent of FCB Worldwide and Bozell, and Cordiant, the London parent of Bates Worldwide, people in the industry say. Some also see True North as an acquirer itself, as its financial outlook improves.

A True North spokeswoman said the company doesn't comment on market speculation. Cordiant chief executive Michael Bungey said his company has a "very workable strategy, and we're intent on executing it."

Additionally, both holding companies and stand-alone ad agencies are looking to buy specialised companies such as marketing and online consultants and public-relations firms. Omnicom Group, of New York, Interpublic Group and now the soon-to-be-enlarged WPP each has annual revenue of more than $5 billion, making them the world's three biggest advertising and marketing companies.

Interpublic Group President John Dooner Jr. said his company expects to continue expanding significantly this year in a number of areas, on the premise that industry leaders must expand to meet their clients' needs.

During the past few years, Interpublic, of New York, and Omnicom each have acquired big public-relation firms. Interpublic bought Shandwick International, while Omnicom purchased Fleishman-Hillard. The two companies also have bought marketing companies, with Omnicom buying Marc and Interpublic recently acquiring NFO Worldwide. WPP already has the biggest market-research firm in Kantar Group, which includes Millward Brown.

Even so, Norm Rickeman, a partner with Andersen Consulting's marketing and media group, said he hasn't seen the big holding companies carry out their promises of global integrated services for clients. "The holding companies really haven't done much integration. They're just a collection of entities," he said.

For that reason, Rickeman says that many of the smaller holding companies, such as True North Communications, can prevail on their own.

"If you've got a strong focus on what you want to be and you're delivering what clients want, I don't think it matters that much if you're a small independent or a large global organisation," he said.

Pressure from the financial community has for some time now been an impetus to companies' diversification into marketing. Into the late '80s and early '90s, Omnicom, WPP and Interpublic were made up mostly of advertising agencies.

When the economy soured, their stocks suffered, as investors worried that the companies were too vulnerable to clients slashing their ad budgets. Since then, the companies have all beefed up their marketing services, a sector that has withstood economic downturns.

Late last year, France's Havas Advertising, looking to balance out its reliance on advertising, agreed to buy Snyder Communications. While Snyder has an ad agency, Arnold Advertising, the big prize was its marketing companies - Brand and Bounty. Once that deal is completed, marketing services will account for 52 per cent of Havas' revenue, said Bob Schmetterer, chairman and chief executive of Havas' Euro RSCG Worldwide, which owns a network of ad agencies and marketing companies.

Schmetterer says holding companies need to continue improving their operating margins and show growth, both of which can come through acquisitions.

Indeed, a deal also has to work for clients, said Abe Jones, a principal with Ad Media, a New York boutique investment banking firm that specialises in marketing. Young & Rubicam spent several days getting the nod from its clients before sealing its deal with WPP. But in the end, he said, "the only thing that matters [for holding companies] is whether a transaction will enhance shareholder value."

How will small ad agencies fare in a consolidating industry of ever-bigger giants?

At an annual advertising conference in Bermuda that ended over the weekend, the question was put to the heads of several small shops. All stressed the need to maintain some independence, which they felt was needed to do the creative work that distinguishes them from bigger ad agencies, but none ruled out the possibility of being bought.

Michael Dweck of New York's Dweck acknowledged the benefits of being part of a global company, saying his agency would have easier access to partnerships with other marketing companies. Also, more people would see a small shop's work.

"Most of us are facing this," Dweck said. "Clients are growing, and we need to be prepared."

-- Sarah Ellison contributed to this article
-- The Wall Street Journal