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* Ad firm slightly raises 2013 organic growth forecast
* H1 pretax profit up 12 pct to 524 mln stg
* CEO says will step up smaller deals in emerging markets,digital
By Paul Sandle and Belinda Goldsmith
LONDON, Aug 29 (Reuters) - WPP, the world's largestadvertising agency, slightly raised its 2013 forecast onThursday due to rising revenues and said the merger of two majorrivals would spur it to step up its pace of small and mediumacquisitions.
WPP posted a 12 percent rise in headline pre-tax profits forthe first half to 524 million pounds ($810 million) with a 7.1percent rise in first-half reported revenue to 5.3 billionpounds, broadly in line with market forecasts.
But it said like-for-like revenue rose 5 percent in July,year-on-year - its strongest monthly rate this year, prompting aslight increase in its forecast of just over 3 percent growth,though the company would not specify what the new figure was.
Chief Executive Martin Sorrell said he had been taken bysurprise by last month's merger announcement from rivalsPublicis and Omnicom, with the new $35 billioncompany to overtake WPP as the No. 1 advertising group.
Describing the merger as "big, bold, surprising", Sorrellsaid it remained to be seen if it would be successful.
"If we are a challenger brand, this gives us an opportunityto be even more aggressive in upping our strategy," Sorrell toldReuters.
He said WPP, which owns ad agencies Grey, Burson-Marsteller,JWT and Ogilvy Group, had no plans for any large deals but wouldpick up the pace of its strategy, and spend 300-400 millionpounds a year on small and medium acquisitions with a focus onnew markets, new media and data investment management.
The London-listed company raised its target for revenue fromnew markets and new media to account for 40-45 percent of totalrevenues by 2018, up from 35-40 percent.
"We have done a large number of small acquisitions in thepast month of so ... and we are certainly upping the pace," hetold Reuters.
WPP shares were up 4.3 percent at 1,229 pence by 1142 GMT,outperforming a 0.7 rise in Britain's FTSE 100 blue-chip index.
"CLUNKY"
Sorrell criticised the Publicis and Omnicom merger.
"Its structure and organisation is clunky," he said in astatement. "Potential client and, even more importantly, peopleconflicts are considerable, exacerbated by a lack ofpre-announcement consultation."
But he said the merger was at worst neutral and at besthighly positive for WPP and competitors, and would result in further consolidation and concentration in the industry.
Senior European advertising executives have said areas ofclient conflict in the new, combined company could includeadvertisers in the consumer goods, tech and automobile sectors.
Looking at 2013, WPP saw strongest revenue growth in Britainin the second quarter, up 5.4 percent on a like-for-like basis,while western continental Europe continued to be weakest.
WPP confirmed its headline operating profit target of 15.3percent for the year, up 0.5 percentage points.
Sorrell said 2014 was "a better prospect" as the SochiWinter Olympics, Brazilian World Cup, mid-term Congressionalelections in the United States and early forecast of worldwideGDP growth of about 4 percent were all good for the ad world.
"If advertising remains at the same percentage of GDP, whichlooks at least likely, the prospects for the communicationsservices industry are set fair," Sorrell said.
Analyst David Reynolds at Jefferies said WPP was "navigatinga difficult year well".
"Much remains to be done to execute a second-half weightedfull year, but (WPP's) commentary around July revenues ... bodeswell," he said.
