Close-Up: Live Issue - Why Dare finally decided to sell to Cossette

Dare picked Cossette over the other holding company giants. So, what did the Canadian group offer, Kunal Dutta asks.

It was 12.55am last Tuesday when Mark Collier signed his last document, bid his new owners goodnight and disconnected the squawk box to Cossette's HQ in Canada. That moment marked the end of Dare's independence and the beginning of a new chapter in its seven-year story.

The deal, which will see Cossette acquire a 65.4 per cent share in the agency for £10 million, raises a number of questions. Not least why Dare has overlooked a wealth of approaches from large global networks only to sell to a marketing services giant with its main interests rooted in Canada.

Dare is Cossette's fourth London acquisition since 2003 in a spending spree that has included the brand consultancy Identica; the PR company Band & Brown; and the ad agency Miles Calcraft Briginshaw Duffy and its DM subsidiary Elvis.

As four agencies peppered across disciplines with none standing out as a sector leader, the acquisition strategy to date fails to read on paper as well as that of an Aegis or WPP. Yet, according to Collier, this is exactly the point. Two years ago, he met with the Dare planning partner John Owen to discuss the direction of the agency.

"We felt our future would not be decided by joining into an advertising agency or selling into a network," he recalls. "But at the same time, we realised that in order to grow, we needed to develop our service offering and have a wider geographical reach."

This, no doubt, explains the unfruitful advances from the holding company giants, rumoured to include Publicis, Omnicom and WPP.

Cossette meets this brief as a holding company that will allow Dare to fulfil its two main ambitions. "It is neither a traditional media company, nor an advertising network," Collier asserts. "It is a home-grown marketing giant that gives us access to different marketing disciplines and the chance to expand internationally as per market conditions or client demands."

Dare first encountered Cossette Communications in 2003, when the digital agency was working alongside MCBD on the Travelocity account. "We heard good things about how it had engaged MCBD and allowed it to retain autonomy while helping it to grow on its own terms," Collier says. But official talks between Cossette and Dare did not begin until December 2006.

Now, the specifics of the deal are nailed down. It has been carefully structured as a five-year uncapped earn-out that will ensure Dare's senior management team stays locked in for the duration. Cossette will assume Bartle Bogle Hegarty's minority share of 30 per cent, marking the end of Dare's official relationship with BBH which began in 2002. BBH is now developing its own digital offering after winning the online portion of the Unilever Lynx/Axe brand.

"We increased our stake in Dare five years ago when no-one could predict the way that digital was going to evolve," Ben Fennell, the managing director of BBH, says. "Lately, we've found that the terms of engagement have changed. It's important for us to develop our creativity and digital expertise in-house. The timing of this deal has worked out well for both parties."

By 2010, Cossette has the option to increase its ownership to 82.7 per cent for a sum linked to Dare's profit growth, with the remaining share to be acquired in 2012. Dare's last audited pre-tax profit for the year ended June 2006 was £716,919. The total purchase price is uncapped, but could reach £30 million if profits grow at an annual average of 25 per cent.

So there is little doubt that Dare's management team is set to gain financially from the deal, as long as the company rides the crest of success it has enjoyed recently. The wider question is the role Cossette plays as it touts Dare as a key element of its UK expansion strategy.

Cossette's "convergent communications" concept is one that promotes multi-disciplinary teams. Having worked alongside Band & Brown and MCBD in the past, Dare will be expected to work with all three UK companies. Cossette also owns Fjord Interactive, a US consultancy specialising in a range of interactive technology including adserve, one area expected to be a large part of Dare's future growth.

Claude Lessard, the Cossette chief executive officer, president and chairman, says having completed a major chunk of its UK acquisition strategy, the company plans to pull the four entities closer together: "We want to work harder to present ourselves as a group. To do this we need to make sure that relationships are integrated, so that staff across disciplines can chase new opportunities as a group, as well as individually."

Lessard sees all four companies working out of the same office within two years, and predicts a UK president from one will oversee the group. But he insists management teams will remain. "Convergence can only work when each discipline is the best of its breed," he says.

In buying Dare, Cossette has beaten its much bigger rivals to a best-in-class digital agency. Dare's ability has the potential to help its Cossette brethren become potent pitching forces.