Karen Yates discovers the careful manoeuvring that helped GGT capture
In London you can almost hear the sound of cheque books flapping as the
world’s few big agency networks jostle for the holy grail of advertising
- critical mass.
But last week, while the sharks were still totting up their price/
earnings ratios, a relative minnow - GGT - nipped in and bought one of
the world’s top 15 networks. It’s a move that will triple GGT’s size and
give it a coveted place on the Procter and Gamble roster, and it was all
achieved for pounds 20 million below the asking price (Campaign, last
How did the GGT chairman, Michael Greenlees, do it? How, when the likes
of Grey, Cordiant and the mighty WPP had tried and failed, did GGT
manage to pull off the David-eats-Goliath deal for BDDP? Campaign caught
up with Greenlees two days after it broke the news of the coup. It was
the culmination of five months of hard work, and Greenlees and his
financial director, Mark Bayliss, were exhausted but jubilant.
It began, Greenlees says, in an appropriate venue for the British
takeover of a French group - the Waterloo room at the Grosvenor House
hotel in London.
It was here that BDDP’s chief executive, Jean-Claude Boulet, confided to
Greenlees his fears for the way the sale of his network was going. BDDP
had been put on the block by a group of its principal shareholders. But
it had not brought the kind of bids Boulet desired. Either they involved
breaking up the group or the merger of BDDP into a faceless US network.
The conversation set light to that part of Greenlees marked ‘global
expansion’. Greenlees had long harboured the desire to deliver what he
calls ‘global reach’ to GGT’s relatively modest clutch of agencies,
which are profitable but firmly stuck in the middle ground in terms of
size. (In 1994, for example, GGT was in negotiations with Young and
Rubicam - a deal that would have given Greenlees access to an
international network. The talks eventually foundered.)
His chat with Boulet put Greenlees in mind of an earlier conversation
he’d had with Frank Assuma, chief executive of BDDP’s flagship US
agency, Wells Rich Greene BDDP. Assuma and Greenlees knew each another
well enough and had chewed the fat about the problems ahead for the
group. Perhaps, Greenlees thought, if he could get BDDP management and
clients on his side, then an affordable deal might be in his grasp.
Over the years - and he’s been in advertising for 30 of them - Greenlees
has made the transformation from adman to international company boss,
and this stood him in good stead for the solid round of financial
schmoozing and closed-door conversations. His prudent purchase of three
regional US agencies seven years ago had already won him brownie points
in the City, which is intolerant of expansion freaks who are sucked into
the expensive razzamatazz of New York. Just as important, he has also
earned the reputation in the US for being an interested but not
interfering agency owner.
So when Greenlees and Bayliss began their pursuit of BDDP they had
plenty of the feelgood factor behind them. Which is just as well,
because the deal they devised delivers equity rather than cash to a
sizeable portion of its shareholders. In essence, the arrangement puts
BDDP’s value at about pounds 105 million. Around pounds 55 million will
come from a one-for-one rights issue by GGT, pounds 20 million will be
raised in debt, and pounds 35 million in shares in the new GGT will be
distributed to shareholders.
So what will the deal deliver if it is approved by shareholders next
year? Well, GGT plc will triple in size, and overnight it will move from
earning two-thirds of its revenue in the US and only one-third in
Europe, to a situation where 40 per cent comes from the US, 30 per cent
from France and only 8 per cent in its home base of the UK.
BDDP will be run as a separate network reporting to the GGT holding
company with the existing chief executive, Boulet, and his chairman,
Jean-Marie Dru, still in place. Boulet, Dru and two other senior
managers will acquire about 2.5 per cent of stock in the new GGT as part
of the deal, and Dru and Boulet will sit as part of its expanded board.
If you ask Greenlees whether this means there will be any consolidation
between the GGT and BDDP groups, the answer comes back as: broadly
speaking, no, but that doesn’t mean never.
‘It’s early days to talk about that,’ he says carefully. ‘There are
areas of opportunity for cost savings. For example, in real estate. We
will be looking at how we can streamline some functions, such as
financial reporting, but where we have strong brands operating in the
marketplace there will be no need to change them.’
So what will be the immediate effect in London? The deal will, he says,
deliver serious international network credentials to all his agencies,
including London’s GGT Advertising. This is fortuitous timing, since GGT
is pitching for Wrangler’s pan-Europe business. The new arrangement will
not, however, ‘in the short or medium term’ affect the independence of
the UK agency, BST-BDDP, which is 51 per cent owned by the French
‘Suffice it to say that I’m comfortable with the way things are at the
moment in London,’ he says.
And that’s pretty much how the financial world was feeling by the time
Campaign went to press. It’s good, seems to be the message, to find an
adman who’s careful with our dough. Let’s give him more, and hopefully
we’ll watch it rise.
Perspective, page 16