CLOSE-UP: GLOBAL BRIEF; Can networks control shops?

By RICHARD COOK, campaignlive.co.uk, Friday, 10 May 1996 12:00AM

Richard Cook looks at the pros and cons of network ownership of ad agencies

Richard Cook looks at the pros and cons of network ownership of ad

agencies



How much control does pounds 56 million buy? On the evidence of last

week, not as much as might be thought. The BBDO network’s 26 per cent

shareholding in Abbott Mead Vickers is currently valued at around that

figure. It brings with it a seat on the AMV board, a modest annual

dividend yield. But emphatically not the clout to force the London

agency’s hand.



Last week, Omnicom announced widespread plans to rebrand its BBDO and

DDB Needham media networks under a single pan-European umbrella

(Campaign, 3 May). The move has a compelling organisational logic, and

in the UK has been warmly embraced by BMP, a full-service agency with a

strong media brand. Abbott Mead, by contrast, has politely declined the

invitation to the party, at least for the moment.



‘The nature of our relationship with BBDO is quite straightforward,’

AMV’s finance director, Jeremy Hicks, explains. ‘When in 1991 we agreed

to acquire BBDO’s London operation, at the same time it acquired the 25

per cent stake in us that had been held by Ogilvy and Mather.



‘In the intervening period BBDO has gradually acquired more shares and

has its representative on the board. We’ve always worked together well

in partnership but it has always stopped short of trying to take

control.’



In fact, BBDO could buy another 1.4 million shares in AMV before it

reached the 30 per cent threshold at which it would have to bid for the

company. So far, its stake has served it very well - AMV’s success has

been reflected in a buoyant share price and the two companies have

hardly had to compromise on joint policy. Indeed, the recent rights

issue document paid lavish praise to the closeness of the relationship

between the two companies.



If AMV decides not to throw its media into the pot, it is under no

obligation to do so. It’s a problem shared by most other would-be media

networks. When Carat was building up a European presence in the late 80s

it insisted on taking controlling stakes in or buying outright its

partner agencies. But it was expensive and saddled the company with

scarcely manageable debts. In contrast, CIA Medianetwork started out by

establishing joint ventures and taking minority stakes: a lower-cost

option but without much control.



For BBDO, so far, its arrangement with AMV has combined the best of both

worlds - an agreement on policy direction that doesn’t require the

premium that control implies. At least it now knows that is no longer

the case.



This article was first published on campaignlive.co.uk

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