LIVE ISSUE/AGENCY MERGERS: Can mid-sized shops survive today’s ad market? - Independent agencies are under growing pressure to merge, Harriet Green says
By HARRIET GREEN, campaignlive.co.uk, Friday, 31 January 1997 12:00AM
Like teenagers, mid-sized agencies reckon they’re cool - but everyone else knows better. Not as cute as kiddies, nor as wise as grown-ups: they’re going through a phase. Last week, Simons Palmer Clemmow Johnson grew up fast - by selling to TBWA (Campaign, 24 January).
Like teenagers, mid-sized agencies reckon they’re cool - but
everyone else knows better. Not as cute as kiddies, nor as wise as
grown-ups: they’re going through a phase. Last week, Simons Palmer
Clemmow Johnson grew up fast - by selling to TBWA (Campaign, 24
Two theories explain this. One says the Simons Palmer chairman, Paul
Simons, was dazzled by money, trousering a few million from the
The other credits him with recognising that independent medium-sized
agencies have a grim future.
Mid-sized agencies are being beaten by bigger rivals. Last week, Howell
Henry Chaldecott Lury lost the pounds 6 million Homepride cooking sauces
account in a global realignment. HHCL may also lose Mazda this year if
Ford decides to put everything into J. Walter Thompson. All mid-sized
independents have been through this: just ask Barker and Ralston, which
lost Saab to Lowe Howard-Spink; or Duckworth Finn Grubb Waters, which
saw Pizza Hut snaffled by Abbott Mead Vickers BBDO.
Pooling accounts within large agencies became trendy in 1994, after IBM
swapped 40 agencies for just one (Ogilvy and Mather Worldwide). Since
then, Colgate-Palmolive, De Beers, S. C. Johnson, SmithKline Beecham,
Eastman Kodak and Kimberly-Clark/Scott Paper have followed suit, and the
market share of large agencies has rocketed.
That trend persuaded Martin Puris to flog his funky agency, Ammirati and
Puris, to Interpublic in 1994. Puris, now chairman of Ammirati Puris
Lintas Worldwide, explains: ’We were at the peak of our game ... (but)
we’d seen an impending crisis. Most of our clients were international
and we realised we stood to lose our client base.’ Puris considered a)
acquiring another agency - but he found nothing suitable; b)
establishing affiliations around the world - but that offered scant
control; or c) selling out.
Three years on, he still feels ’c’ was right.
But Rupert Howell, HHCL’s managing partner, insists mid-sized shops can
thrive. ’If you sit in the middle wallowing, the only option is to sell.
It is about having a truly competitive offering.’
Two years ago, Howell reinvented his agency as a ’3D’ communications
shop. Senior talent was allowed to grow within off-shoots such as
Michaelides and Bednash, and the HHCL Brasserie. ’No-one could
understand why we were changing when we were doing so well,’ he laughs.
’But if we hadn’t, we could have had problems. Simons Palmer was a good
agency but didn’t have a point of difference.’ As for globalisation,
Howell is sanguine: ’Fifteen per cent of our business is international.
We’ll win some and lose some.’
Clients, too, suffer from globalisation mania. Three weeks ago, Esso UK
was forced to put its account up for pitch after Shell pooled its
pan-European advertising into JWT. Similarly, Mercedes needed to remove
its UK advertising from Leo Burnett after Fiat, an international client,
complained. Mercedes’ pitch-list was largely domestic, and by awarding
the pounds 9 million account to BDDH last week, the car company has
given some security to another squeezed, mid-sized independent.
Martin Jones, managing director of the Advertising Agency Register,
which helped Mercedes with its shortlist, contends that while conflict
remains an issue, medium-sized agencies will always be needed. In
choosing BDDH, Mercedes ’knows it won’t get stung by international
realignment, and that the agency is big enough to service its business’.
Mid-sized shops benefit from maverick clients too: take Coca-Cola, which
has splintered its line-up from one or two worldwide agencies to more
Mavericks and domestic clients may not be enough, however.
Jim Kelly, managing partner of Rainey Kelly Campbell Roalfe, knows his
in-vogue agency will need to make decisions in a few years.
’Medium-sized agencies offer neither the bedside manner of founding
partners, nor the clout of multinationals.’
And yet Simons insists globalisation didn’t drive him to sell. After
all, Simons Palmer handled international business such as Sony
More persuasive were dreams of grandeur - taking income above a ’glass
ceiling’ of pounds 5 million or so. ’Getting on to the next rung means
winning an account like British Airways. We could have kept growing
steadily but we thought, ’Wouldn’t it be better to have a leg-up into
the bigger division?’’
The big exception is Bartle Bogle Hegarty, still strong after 15
More than half its business is international and the agency has recently
opened in Singapore (a shop is mooted for the US). John Hegarty, BBH’s
chairman and creative director, says: ’You only need a number of
companies to give you an opportunity.
We are not trying to compete with the likes of McCanns. We are a
different type of international agency.’
Puris, however, believes even the mighty BBH will eventually sell to a
network. ’Its international plan won’t work. It might with one or two
clients, but for most there’ll be too many offices in between that
they’ll be missing.’
Is this the end, then, for mid-sized shops? Martin Sorrell, the WPP
Group’s chief executive, thinks not: ’People will continue to leave
agencies in a healthy Darwinian-like process to form new agencies.’ And
those new agencies will one day be medium-sized, raising the prospect of
acquisition or reinvention all over again.
Last September, the GGT Group joined the multinational grown-ups by
tying-up with BDDP, but in the UK, GGT remains mid-sized. And troubled:
last week it lost Nationwide, which represented almost a quarter of its
Company Previous number Current number of
of agencies of agencies
Bayer 48 3
IBM 40+ 1
Reckitt and Colman 35+ 1
S. C. Johnson 28 2
Kodak 4 3
De Beers 2 1
SOURCE: WPP/trade press
This article was first published on campaignlive.co.uk
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