THE MEDIA BARONS: Doug Flynn
By Claire Beale,, campaignlive.co.uk, Friday, 20 September 2002 08:00AM
The Aegis chief has his critics, among them those who say he should make a deal with a bigger company. He tells Claire Beale why he is not putting a 'for sale' sign up.
Doug Flynn made a surprising entry into the popularity stakes last week. For a man who generally barely registers on the radar, Flynn was, momentarily, a little bit of a hero.
The reason for this unexpected sentiment was a tentatively positive forecast for recovery from the industry recession; tentative but tangible. In a market where "managing expectations" has sent share prices tumbling in recent months, a drop of optimism is class-A through the veins of beleaguered boardrooms.
Headlines high on "Recovery before year-end" followed the Aegis chief's pronouncement that we're pretty much at rock bottom (that thing you've been banging your head against for the past 12 months) and should see "some relative recovery" in the final three months of this year. Media stocks were looking a little pinker the following day.
Aegis is the holding company for Carat, Europe's biggest media buying outfit, sixth in the world, and Synovate (although it sounds like tooth whitener for nicotine addicts it is actually a research network). Together, they led Aegis to a 10% hike in revenue and a 3.3% leap in operating profit. It wasn't an impressive set of results in normal circumstances (pre-tax profits fell from £17.6m to £17m), but in this recession it could have been worse. "Solid," the analysts said. Flynn seemed characteristically pleased with himself.
When you survey the narrow landscape of media network chiefs, the barons of the world's media agencies, Flynn stands out, despite his anonymity on the industry stage. As the chief executive of the world's last remaining independent media network, Flynn is unique by virtue of his company's uniqueness. In a business that has been almost exclusively shaped by shareprice-driven consolidation, Aegis still stands alone. It's an interesting, exciting position to be in, fecund with possibilities. Flynn sits potentially at the centre of play, to catch or be caught. Sure, you wouldn't think it to hear the man's vision for the future (more of that a few paragraphs later) but there are a few rival holding companies whose media brand could do with some Aegis brain and brawn.
The Australian Flynn, brought up in Newcastle, New South Wales, falls into the category of media men born outside the media agency. His background is a media one, but not an agency one. He joined Aegis from News International, where he was the managing director.
Flynn learnt the paper trade on a series of newspapers and also lists ten years at ICI and a stint as a management consultant on his CV.
His Aegis debut came in 1998 as a non-executive director. When the dour Crispin Davis quit as the chief executive in 1999, Flynn stepped in. Fingers were crossed that he would prove to be a lively successor, finally giving Aegis the public figurehead and galvanising personality that it had lacked. Carat is one of the most formidable media operations in the world, but one without an identifiable leader to hang a culture and proposition on. Could Flynn put that right?
In the three intervening years, Flynn has been a quiet presence. Some of his natural focus, of course, must be a City one and he has made little visible impact on the character of the operating companies. Critics say he has a butterfly mind, "nothing ever gets done". Some senior insiders find it hard to muster words of loyalty and respect and there is simmering frustration at the company's progress, although admittedly some of this is frustration borne from seeing their peers make millions as their companies get snapped up; Flynn is having none of that.
Yet under Flynn, Aegis has undoubtedly matured. He has watered the seeds of change planted by his predecessor, driving the company beyond its media heritage, overseeing international expansion and developing the research business into a fully fledged network.
Yet beneath the optimism, last week's results (which, bear in mind, did follow a disappointing performance the year before) told a patchy tale. European media operations -- the loins of the whole business -- suffered a 6 per cent decline in turnover. Underlying operating margins for the group -- once the envy of the market -- fell from 12.2 per cent to 11.4 per cent.
"Falling media prices and late campaign cancellations meant that lower levels of commission were earned for the same volume of business," the City statement said. In common with other media agencies, Carat's ambition to move upstream, away from commission and towards fee-based remuneration, is far from protecting the bottom line.
Flynn says in the UK, Carat is currently making around 10% of its income from fees, which is helping here. "That sounds relatively small, but then we have a pretty big planning and buying operation. But there has been a very strong desire within the senior management to go as far upstream in our advisory capabilities as possible and that's growing really quickly." One thing you do notice about Flynn is his preference for several pompous business words where one plain one would do.
The twin concerns of media and market research have meant that, unlike some of its rival holding companies, Aegis has not been exposed to the chillier winds blowing through other marketing services sectors, such as PR.
Flynn reckons that when it comes to riding recession, his are the businesses to be in. "We're in just two major businesses whereas our competitors are in everything but a bath. Media is flat, market research is growing and they're the best two bits of the business relative to the recession. We're definitely not experiencing anything as dire as our competitors are describing."
His competitors have piled on growth through acquisition in recent years.
Now that there's not much left to buy, Aegis is under the spotlight. When Sir Martin Sorrell slipped Chris Ingram's Tempus into WPP's portfolio last autumn, the grapevine seized on Aegis for its next fix and rumours abounded of an imminent deal. So is Flynn flirting?
"Of course I have breakfasts and lunches with these guys and I've listened to vague propositions. But nobody's come out with anything even worth considering. These conversations have been vague and underwhelming."
And, yes, Aegis does have a USP in a market which is increasingly amorphous.
"Independence is still valued by our clients. There's nothing for our clients in a merger, nothing for our businesses or our employees. Clients have no interest in this whole consolidation thing. If they want public relations they want the best public relations firm; there's no added value in going to a PR company just because you happen to work with one of its sister operations.
"It's about people, it's about quality of process, it's about what we're able to deliver for the client. If being part of a big conglomerate is important, then why do we keep winning business? We win because there must be some value in us being independent and, at the end of the day, we're seen to be the best in the field. If that's what clients want then that's what they're gonna choose."
But then, of course: "At the end of the day, if somebody turns up and makes an outrageous offer, sure we're going to talk to them. But as far as we're aware nobody has any serious intent about pursuing us. And we're not about to put the 'for sale' sign up."
It sounds reasonable, and Media-edge:cia post-WPP is a caution. But despite some impressive new-business gains in the US, Carat still hasn't quite got the stature of its rivals over there, ranking ninth, and there's more work to do in Asia-Pacific. Some critics believe Flynn has narrow horizons which are holding the company back, and claim that the fact that he doesn't stand to make any money himself out of a sale and would not be guaranteed the top job in a merged company means he's not personally motivated to deal.
Flynn insists: "In the next five years we can end up as the number one media operation globally. We'll get there by winning business, that's how it should be done, not by just buying things." The sentiment is an honourable one, the ambition a terrifically optimistic one. Carat currently ranks sixth in the global media league with more than $16 billion in billings. But matching the corporate might of an Initiative, OMD or MindShare, despite the sellotape, wings and prayers which still lie behind some of the networks' local offices, will be a challenge as the other holding companies become better at leveraging their group propositions.
Well, if Flynn is not expecting to grow Carat through significant media acquisitions, what about purchases in related marketing services? "It's a possibility. But that's a strategic evolution; there are only certain things the investors will tolerate and if you're expanding what you're doing, you kind of need to do it one step at a time. The investors are only really now getting round to accepting that perhaps we know what we're doing in market research ... perhaps.
So we have to deliver on that. Ask me the question in a year's time and I might have a different answer but right now we believe we're in good growing sectors."
So Aegis won't be making a bid for a Havas or even, ahem, a Cordiant.
"I think it's pretty unlikely," Flynn says, with as much verve as if I'd asked him whether he'd be washing his hair tonight. "We've taken a buy-and-build approach, with small-scale acquisitions; we don't have any plans to change." But is there anyone out there Flynn would love to get his hands on? "That's a conversation between me and my board." OK. Is it a conversation you've had recently? "It's the sort of conversation we have regularly."
He does warm up when given the chance to knife his rivals. "Other media companies have been beaten down as part of the big holding companies. Almost every single one of these big acquisitions have haemorrhaged clients and talent. And look at OMD - spent the first four years of its life without a head. IPG, well they've just hired the guy from Grey (Alec Gerster) ... my understanding is he's a lovely guy, but he's not going to solve their problems; they lose business hand over fist.
"I just don't see any of these players getting their act together. Some of them are getting better. You've got companies like Starcom which is a good operation in America, but they've just been acquired; are each of those guys who have made money out of that just going to be satisfied sitting there or are they going to walk out the door? Are some of the clients going to walk? My guess is yes both times."
But before you reach for your gun, Flynn adds: "I'm not for one minute saying the companies that are doing the acquiring are wrong, strategically or in terms of price. But there sure as hell are significant implementational risks and there are certainly some downsides. I really wonder whether (Interpublic's chief) John Dooner feels that True North was a fantastic deal."
There are those, though, who wish Flynn had a little of the chutzpah and blazing vision that have driven some of the most spectacular deals in the market. Frustration that he hasn't is said to have been behind the departure of Carat's UK head, Ray Kelly, earlier this year. Flynn, though, is consistent, if uninspiring, to the last.
"I don't see any problem with the way we are going now. We've got the opportunity to do something unique and special and the fact of the matter is we would like to be in charge of our own destiny. If we fail somebody will buy us."
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This article was first published on campaignlive.co.uk
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