William Morris to Invest in Droga5, an Ad Agency

William Morris Endeavor, the giant talent agency, is close to acquiring a significant minority stake in Droga5, an independent advertising agency based in New York. The deal, which is estimated at $225 million, is expected to be completed early next week.

W.M.E., which is based in Beverly Hills and headed by Ari Emanuel and Patrick Whitesell, will acquire a 49 percent stake in the creative agency, which is led by David Droga.

Executives from both companies said the partnership would allow them to create more brand-supported content by combining their significant advertising and entertainment resources. Droga5’s clients include brands like Coca-Cola, Motorola, Prudential, Mondelez International and Spotify while W.M.E. represents stars like Lady Gaga, Alicia Keys, Javier Bardem and Oprah Winfrey.

“Advertisers and brands want to get closer to our content,” said Mr. Whitesell, adding that the partnership would offer advertisers an “A to Z solution” for their campaigns instead of having to hire multiple agencies. “There’s a need for it on our end, for our clients to have a more sophisticated bridge to this.”

Talks between the two companies began about a year ago when Mr. Emanuel, a co-chief executive along with Mr. Whitesell, phoned Mr. Droga, the agency’s founder and creative chairman. Mr. Droga, while intrigued, was initially skittish, he said. “The thought of being in bed with anybody made us nervous,” Mr. Droga said in an interview at the agency’s headquarters in downtown Manhattan.

The agency, whose work has featured celebrities like Jay-Z, Beyoncé and Sarah Silverman, is used to getting attention, including from many of the major advertising holding companies. “We’ve been courted by everybody and we’ve politely said no because I think the majority of the acquisitions that happen make the industry smaller not better,” Mr. Droga said. “So many alliances or deals are done out of necessity. There’s not a vulnerable party in this partnership.”

A Droga5 campaign to promote Bing, the Microsoft search engine, in tandem with “Decoded,” Jay-Z’s autobiography, got Mr. Emanuel’s attention. Pages from the book were displayed in different cities around the world on everything from billboards to pool tables. Fans could connect the pages by using a digital game that included Bing technology.

“That’s an integrated approach that not a lot of people are doing,” Mr. Emanuel said. “We have clients, whether it be on the nonscripted side, the scripted side in television, music clients, creatives that create content for different screens, all of that is going to be on the table.”

Matt Chesler, an equity research analyst at Deutsche Bank, said Droga5 was an agency that had historically been uninterested in replicating traditional advertising agency models. “They are interested in building and creating proprietary branded content and proprietary technology,” Mr. Chesler said. “They are looking a their role of value creation in a much broader way than providing marketing services for a fee.”

In 2012, Droga5 created its own digital production studio called De-De. The studio has created an array of products, including a tool to amplify social media messages called Thunderclap, a voice messaging mobile application called Pling and an e-mail visualization tool for tablet computers, called Birdseye.

W.M.E. is the product of a union of William Morris and Endeavor in 2009. In 2012, the private equity firm Silver Lake acquired a minority stake in the company and has since helped advise W.M.E. on potential acquisitions. The company has struck several digital media partnerships since 2009, including one with the digital advertising agency Red Interactive and a social media start-up called theAudience. It has also invested in a mobile application studio called Chaotic Moon and an e-commerce company called OpenSky.

As consumers increasingly ignore traditional advertising and are bombarded with a constant stream of content, both online and offline, advertisers have been forced to find more compelling ways to get their attention. “Clients have been talking about how do we make our brand more influential,'’ Mr. Droga said. “How do we infuse in pop culture.” W.M.E. could help provide the answer given its substantial reach in television, publishing, music, film and theater.

Jeff Levick, the chief marketing and revenue officer at Spotify, a Droga5 client, was optimistic about the partnership. ‘What’s really interesting for us is to see if their partnership unlocks new opportunities for us and access to develop even bigger plans,” Mr. Levick said. “On the talent side there’s a lot of great things that we can extend. If their relationship with William Morris Endeavor helps do that faster and more efficiently, that’s great.”