How Advertising Agencies Compete in 2026: AI and Platforms

U.S. advertising spend is forecast to reach $414.7 billion in 2026, up 5% from 2025, according to Dentsu—but the growth masks a fundamental shift in how agencies compete and where M&A activity concentrates.

The Commercial Banking and Investment Banking teams at J.P. Morgan work with advertising and marketing services companies across the spectrum—from independent firms to global networks—and see a common question: where will your value come from in three to five years?

M&A activity slowed through the second half of 2025 as agency CEOs assessed the implications of the Omnicom-IPG merger in November 2025, which created a combined entity generating $25 billion in annual revenue with over 100,000 employees worldwide. Many industry executives hit pause—watching where assets might be divested, where talent would land and which clients might seek alternatives. “We saw a bit of a slowdown in traditional agency M&A,” said Craig Rosoff, Head of Mid-Cap Media & Communications, Investment Banking. “CEOs were taking a wait-and-see approach.”

Dealmaking is expected to pick back up in 2026, but activity has become selective and capability-led rather than broad consolidation. The deals moving forward concentrate where firms see clear strategic advantages: connected TV advertising capabilities, retail media management tools, and influencer and sports marketing. Digital out-of-home and PR acquisitions continue at a steady pace.

When advertising companies do pursue M&A, the rationale typically aligns to one of three objectives, said Eli Acosta, managing director in the Media, Communications & Digital Infrastructure group at J.P. Morgan Commercial Banking. Companies are seeking geographic expansion to support new client wins, service diversification to fill capability gaps, or acquiring client relationships and talent to deepen the roster. “You can’t win certain Agency of Record contracts without being in Asia and Europe,” Acosta said. “It’s about the capability piece—giving clients what they’re looking for.”

The Omnicom-IPG merger created a combined entity with scale, cost synergies and data assets to compete against platform pressure and tech-enabled independents. For midsize firms, the deal creates practical openings. “A merger of this magnitude presents our midsize clients an opportunity to pursue certain assets that may be sold or spun off, and hire talented people to bolster their existing business,” Acosta said.

Valuation dynamics favor companies that have moved beyond traditional agency models. “Specialized firms with strong recurring revenue models and tech-first or truly tech-enabled platforms continue to be a significant focus for acquirers,” Rosoff said. Buyers want to see proprietary data assets and workflow integration that demonstrably improve client outcomes. 

AI itself has shifted from deal-delayer to deal-driver. “The biggest hurdle to overcome in recent investment or acquisition decisions has been the unknown impact of AI,” Rosoff said. “Many companies have made a tremendous amount of progress over the last 18 months in understanding the data they own and defining what AI can do for them. As AI starts to shift from an unknown to a tailwind, valuation will improve, and more deals will get done.”