"Amid strong pressure on advertising agencies’ business models, a consolidation deal is a credible scenario," Jerome Bodin, an analyst at Natixis, wrote in a research report this week.
He suggested the two most likely scenarios are a consulting or IT services company buys an ad agency group or two ad groups merge as Publicis Groupe and Omnicom tried to do in 2014.
Bodin suggested the first scenario is "most credible" and suggested a consulting firm such as Accenture or CapGemini is a more "likely" acquirer than a tech group such as Google or Oracle.
He outlined several permutations, which could involve a takeover, a merger, or the setting up of a 50:50 joint venture.
All of the five big agency groups, WPP, Publicis Groupe, Omnicom, Interpublic and Dentsu, could be targets, according to Bodin.
"Accenture is a credible buyer," he said. "In view of its size ($90.4bn/£67.5bn) market capitalisation), it could acquire and easily integrate Publicis (€13.3bn/£11.7bn) or WPP (£17.5bn).
He noted shares in Publicis have fallen 11% and WPP by 22% this year and are each trading near "all-time lows" on a multiple of around 11 times’ earnings, while Accenture’s shares are on a multiple of 20 times’ earnings.
"The valuation gap between Accenture and the advertising agencies has never been as great," he added, although he expects any buyer would have to pay "a premium of at least 30%".
He said the "main advantage" for a company such as Accenture would be to buy digital agencies such as Publicis Groupe’s SapientRazorfish and WPP’s AKQA and Xaxis – many of which have been acquired at "high multiples" of upwards of 14 times earnings and could now be bought at "a much lower price".
The "industrial rationale" behind the failed Publicis Groupe-Omnicom merger "still applies today" because it would "create an undisputed leader (particularly in consulting and media buying), limit competition and therefore improve the prices of the services offered by advertising agencies", according to Bodin.
He said "large-scale M&A" is back on the agenda because of a deterioration in the ad agency sector, noting average organic growth among the big groups slowed to 0.2% in the second quarter of 2017 from 1.5% in the first quarter and 2.9% last year.
"This is a sudden and surprising deceleration as it does not come amid an economic slowdown," Bodin said.
"The reason is that some fast-moving consumer goods advertisers (food, beauty products, automotive, etc.) have reduced their spending."
He suggested the pressure on agency groups was "part of a longer cycle" as advertisers have been pushing down on fees for years and the US Association of National Advertisers investigated "non-transparent" practices at media agencies last year.
"Against this backdrop, we believe that the advertising agencies might seek tie-ups to reduce competitive intensity and increase their bargaining clout vis-à-vis clients," Bodin wrote.
"Ad agency executives have often seen consolidation as a means of resolving some of the sector’s problems. This was the rationale behind the Publicis/Omnicom deal.
"With hindsight, the merger would have probably made it possible to avoid (or at least slow the pace of) the current round of media reviews and therefore the pressure that the agencies are feeling from advertisers.
"The new group would then have had more time and above all the financial headroom to carry out its digital transformation in its own time."
Bodin said a hostile takeover was "improbable" because of the importance of retaining staff "but not impossible".
He suggested "the human factor is primarily a risk in the creative advertising and consulting segments" and an acquirer "could consider selling some subsidiaries to their managers, notably in creative or PR" where scale matters less.
Accenture reports annual results on Thursday.