Close-Up: Profile - DLKW's founders take the money and stay put
By Noel Bussey, campaignlive.co.uk, Friday, 25 April 2008 12:00AM
After the earn-out from its sale to Creston, DLKW has big plans on how to develop its offering further.
On Monday last week, a spacious office looking out towards Waterloo Bridge was the home to four very jovial, relaxed and chatty agency heads, who were happily pontificating on the future of their agency.
In fact, the vibe was extremely good, and not just in the office, but throughout the whole building.
It's almost as if all four of them (and a further 26 members of the staff) had all very recently received a windfall from a three-year earn-out clause of what seems to have been a very successful sale of Delaney Lund Knox Warren & Partners to Creston.
In fact, when talking about it, Greg Delaney, the chairman, says: "We don't want to sound smug or self-satisfied, but the last three years have been good."
However, this confidence turned into resignation following the news just days afterwards that they will now be forced to re-pitch for the Halifax account - a £17 million chunk of cornerstone business.
"There were always conversations about changing the campaign this summer, and Halifax has decided to see what else is out there. The client likes us and we have a very strong chance, but loyalty doesn't butter many parsnips in the financial fraternity," Tom Knox, the deputy chairman, says.
It also raises the question of whether Howard will be killed off (metaphorically, of course) and whether the agency will dump the musical ads - something for which they have become very famous, to the point of it becoming a bit of an industry joke.
"Maybe we don't have to do singing all the time. After all, you can be populist without singing," Delaney admits.
And it may be the perfect time to instigate this sort of change in creative direction, as the agency is also now without its two executive creative directors, Gary Betts and Malcolm Green, who upped and left as soon as the earn-out was made.
However, the partners don't seem too perturbed. Mark Lund, the chief executive, says: "They have left a mature and dependable creative department. It's another step in the journey of the agency."
Which, of course, leads beautifully on to the issue of the partners' futures and their response to the notion that they are all going to take their money and run.
They all emphatically claim that they are not - there'll be no splashing out on toys or upping sticks for warmer climates. It's just not their style, apparently.
To which Lund picks up the quote of the day: "We're much more Gipsy Kings than Rod Stewart."
Knox says: "People just over-exaggerate the idea that we're going to naff off and buy yachts - we don't have the inclination, or the money, for that."
Although it is mentioned that Lund's most recent holiday was walking in the Brecon Beacons, Don Elgie, the group chief executive of Creston, believes the figures on the earn-out speak for themselves.
He says: "The guys have done amazingly. They've exceeded all of their targets. When we design an earn-out, we do it so the growth required is almost impossible, but they managed to make it."
He's so impressed with them that he's had them all sign long-term incentive schemes to tie them into the company they have built, and ensure it continues to grow.
Delaney says: "We haven't changed anything for the earn-out. Of course it's tempting to squeeze the shit out of the agency and leave an empty husk, but that wouldn't be fair on the rest of the staff."
Richard Warren, the director of communications strategy, adds: "If you want to leave after the earn-out, you should sell to a network. If you want to remain independent, then you have to be careful who you deal with. Creston has the point of view that if you have an entrepreneurial spirit, they will encourage that spirit.
"That's why we've been successful - nothing has changed in the way we've worked together or run the agency. Independent agencies have been successful recently and we've managed to remain independent through this period."
Knox says: "We could have done a lot of other deals. There were plenty of people interested. If you do a deal with a network, you get the 'promotional toolkit' full of buzzwords and jargon. We underestimated the extent that the deal changed perceptions of us. It's good we're out of it now, so people can see we still care about the agency."
The deal also seemed to help Creston, whose share price rose quite dramatically during the three years of the deal, with it going from 150p per share before the deal in 2004 to its highest-ever point, 214p per share in late 2007.
However, it seems to have hit a crisis of confidence in recent weeks with a drop-back to just under 100p per share, but this is more about current economic uncertainty than its investments.
As for the company's results, for the year ending 2004, just before the deal in early 2005, the company's revenue was just over £13 million and its profit was £2.3 million.
In year-end 2007, they had risen to just under £70 million revenue and £10 million profit.
So, with their millions in the bank and a happy paymaster, the guys are now free to move forward - and, unsurprisingly, have big plans about how to "define and develop the offering".
As with most agencies, digital is a big part, and the partners believe that integration of talent into the main agency is the best way forward, rather than a bolted-on solution.
But do clients want this approach? Lund is understandably wary, and warns against too much cross-selling to clients and thinking you can offer everything, but also says that this shouldn't put you off.
Knox sums it up by saying: "We don't want someone else telling our joke."
Here, the conversation turns to Morrisons, a company that has seen a turnaround in recent months and has, according to Elgie, been very open about attributing its success to the agency's marketing and advertising strategy.
However, most of the excitement and animated talk comes from the plans for growth outside of the agency, with acquisitions and European expansion (fully supported by Creston) at the top of the list - although it seems as if nothing is fully formed yet. Either that or the partners are playing their cards very close to their chests.
Lund says: "It's always been organic growth until now, but we're being grown-up about it. We know the sectors we're interested in, and have ideas on potential companies in mind."
With plans for the future taking form and money safely in the bank, attention naturally turns to whether the partners still want to work together. After all, the agency has been in business for nine years and all four of them have known each other for much longer than that.
However, if the amount of friendly piss-taking is anything to go by, they'll be happy living in each other's pockets for a while yet.
Delaney says: "Agencies don't work well when the people running it don't like each other. You can't have those sorts of issues hanging over you."
Lund adds: "After the amount of time we've all known each other, we'd know if we hated each other by now."
All in all, the impression given off is of a group of friends who have already been successful and are now looking at the next challenge - which really doesn't seem to include sailing off into the sunset on a fancy new yacht.
This article was first published on campaignlive.co.uk
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