(Reuters) - Bank of America Merrill Lynch (BAML) has struck a bearish tone on global ad agencies, seeing three years of muted growth at companies such as WPP WPP.L, Publicis PUBP.PA and Omnicom OMC.N.

FILE PHOTO: A Bank of America Merrill Lynch sign is seen on a building that houses its offices in Singapore May 17, 2012. REUTERS/Tim Chong

Ad agencies have resorted to M&A and partnerships to try to fend off a growing threat from business consultancies and tech companies.

In 2015, Publicis acquired U.S. digital ad firm Sapient to accelerate growth in Internet advertising. Its division Publicis.Sapient recently won a deal with Carrefour CARR.PA to assist the retailer on e-commerce challenges.

Competition among the big four of WPP, Omnicom, Publicis and Interpublic IPG.N has become fierce as clients review the effectiveness of their marketing budgets.

“Marketing spending are secularly shifting from storytelling and creativity towards technology, customer experience, data-driven and business transformation,” BAML analysts wrote in a note to clients.

They reinstated coverage of the world’s top ad companies with an “underperform” rating after what they said was an “extensive discussion” with experts across the advertising value chain.

Shares in ad companies have taken a hit in the last year and have underperformed the overall market, which has been setting fresh records. WPP has lost about one-third of its value since the start of 2017.

WPP, the industry leader, has taken the biggest hit, with leading clients such as Unilever ULVR.L, Nestle NESN.S and Procter & Gamble PG.N cutting spending as consumers turn to more niche brands.

In its most recent earnings conference call, P&G said it aimed to save another $400 million in agency and production costs, on top of the $750 million it had already saved. P&G did not give any time frame for the cost savings goal.

“We view this as a trend, not a one-off,” BAML added, saying it expected the agencies’ organic growth to flatten out by 2020.

The analysts believe consulting companies, such as Accenture ACN.N, Deloitte or IBM IBM.N will start to have a "bigger impact from 2018 onwards, leading ad agencies to lose market share to the consultancies."

“The lucrative media planning/buying space will start being disrupted by consultancies, helped by the rise of AI and their edge in data analytics.”