Advertising is a business that’s been around for a long time. It’s perhaps become better known due to the hit show “Mad Men,” which focuses on the world of advertising in the 1960s. Back then, ad agencies made a great deal of money as companies rushed to increase their exposure to television, the hottest medium of the day.

Today, the hottest medium is the Internet — and in particular, social media. But television still brings in the big bucks for ad agencies.

However, the Internet has forced many ad agencies to adapt to changing times. One way that they have gone about this is through mergers. Back in the 1960s, the ad business was much more competitive and there were many competitors. Over the years, many sold out, leaving just a few big players left. (My colleague Adam Fischbaum recently profiled one such agency.)

One ad company still standing is the Interpublic Group of Cos. (NYSE: IPG). The company was founded in 1902 and was known as McKann-Erickson before 1961.

However, if billionaire Paul Singer gets his way, Interpublic Group won’t be standing alone for long. 

He has amassed a 6.7% stake in the advertising giant and is pushing for a sale of the company. Singer says that shares of Interpublic are undervalued and that he wants to work with the company to boost shareholder value.

There has already been speculation in the media that Interpublic would be a good fit for Japan’s Dentsu (OTC: DNTUF) or Publicis Group (OTC: PUBGY). Publicis could be interested, especially after it failed to merge with Omnicom Group (NYSE: OMC) — both of which have underperformed Interpublic by a wide margin over the past five years. 

In addition to Singer’s view, noted value investor Mario Gabelli told CNBC that Interpublic is an attractive takeover candidate.

Part of what makes Interpublic such an attractive target is that global ad spending continues to rise. Total global ad spending is forecast to increase 5.5% this year on the back of a rebounding global economy, an increase in television ad buys, and the rise of mobile advertising.

With over 45,000 employees worldwide, Interpublic Group is the fourth-largest advertising company in terms of revenues. The company owns nearly 100 ad agencies with offices in more than 100 companies working in every major market. Some of its biggest clients include names like Coca-Cola, Unilever, Microsoft, and Johnson & Johnson. Each client gets a customized marketing plan tailored to individual markets.

Interpublic’s latest earnings report shows the company’s efforts are paying off. Earnings per share increased 28% year over year on a 5% increase in revenue, to $1.9 billion. Its international segment remains the company’s prime growth driver. Revenues there grew 8% compared to a 3.4% increase at its U.S. operations.

The company has room to cut costs and improve its margins. Its operating margin this year is forecast to be around 10%. Compare this with the company’s goal in 2011 of a 13% operating margin.

So far this year, the company has repurchased 5.6 million shares at a cost of $97.3 million. IPG is trading at a forward price-to-earnings (P/E) ratio of 16 times next year’s estimated earnings, a discount to the industry average P/E of 25. Although IPG is attractively valued, it could attract a sizable premium in the event of a buyout. IPG also pays a dividend yield of 1.9%, which amounts to a 48% payout of earnings.

Risks to Consider: If a buyout does not occur in the next few months, shares could sell off as impatient investors look elsewhere.

Action to Take –> Buy shares of Interpublic Group alongside Paul Singer. He is known for his persistence and will likely not rest until the company is sold. If a buyout were to occur at 25 times next year’s earnings, it would put shares trading at $30. This would equate to upside of 50% from today’s prices.

P.S. — My colleague Dave Forest and his staff recently went looking for the absolute best stocks on the market — the kind of companies these ad agencies aim to become by merging. The goal: Find stocks that are good enough to buy, forget about and hold “Forever.” After six months and $1.3 million worth of research, the team struck gold. To learn more about the “Forever” stocks that they uncovered — including some names and ticker symbols — click here.