THE KINGS OF MADISON AVENUE: Michael Bungey - The chairman of Cordiant tells Stefano Hatfield why the group should remain independent

Michael Bungey as a King of Madison Avenue? Stalwart readers of Campaign may well find the idea disconcerting, risible even. But only because of the strange British unease about success.

Michael Bungey as a King of Madison Avenue? Stalwart readers of

Campaign may well find the idea disconcerting, risible even. But only

because of the strange British unease about success.



And Bungey, by most people’s measure, must be deemed a success.



Forget what you think you know of Bates UK, the London agency riven by

successive internal disputes and a revolving-door senior management.



Forget the rancour and poison surrounding his alleged role in the

departure of his former boss, Maurice Saatchi, from the agency he

founded, and the subsequent loss of the Mars business. Forget the old

Michael Bungey who ran a little London healthcare advertising agency and

concentrate instead on Bungey today, the worldwide chairman of the

Cordiant Communications Group.



Here is that same Bungey in New York on a blustery winter’s morning,

comfortably ensconced in Bates USA’s mid-town Manhattan headquarters. It

is one of the more self-consciously modern and stylised of the New York

HQs - to reach the meeting room one walks through the kind of minimalist

reception area of which the Saatchis would be proud.



The air is infused with delicious morning aromas from the staff coffee

bar. We walk past a Smersh-like boardroom to a functional ante-room

where we sit on soft sofas. The room is dominated by what we both agree

is a dreadful portrait of Bates’s founder, Ted Bates.



Ted Bates is, of course, the wrong subject. If there has to be a

portrait looking down on Bates employees and visitors, it should be of

Rosser Reeves, the advertising guru who gave the world the Unique

Selling Proposition - the mainstay of US and, therefore, global

advertising strategy for decades.



The USP is what gave Bates its own USP, enabling it to stand out as one

of the advertising brands of the modern era. Then, in a move which is

part of advertising folklore, in 1986 the Saatchi brothers entered stage

left waving chequebooks. Bob Jacoby, Bates’s then chief executive,

thought of a number, doubled it and walked away with dollars 110 million

(plus dollars 5 million in a breach of contract suit). The American

client community, noticing belatedly that its agencies were making real

money, reacted furiously.



Worse for Bates was the resulting fall-out. It was ravaged by an exodus

of long-standing major clients, headed by Procter & Gamble and Colgate.

Having subsequently lost its flagship client, Miller, the agency was

again rocked by Mars’s exit following Maurice Saatchi’s departure from

the parent company just over five years before.



This waltz through the past is relevant today because it helps to

explain the relative dearth of global clients at Bates. This has been

one of the chief reasons why sceptics (like myself) have been sniffy

about Cordiant’s chances of staying independent in a merger-crazed

world.



It’s the type of attitude that Bungey has fought hard to break down

since Cordiant’s de-merger from Saatchi & Saatchi three years ago.



’You have to go back in history to understand Bates and Cordiant today,’

Bungey says. ’First we lost those multi-nationals, then when the

marketing community recognised the world was going global seven or eight

years after it had laughed at the Saatchis for saying it - around the

early 90s - the Saatchis had no money. We weren’t in a position to make

hay when everyone else was.’



This is the situation from which Cordiant is still trying to

recover.



And if yesterday’s results are in line with expectations then Bungey

will once again be on course for disproving the advertising world’s many

doubters, who feel a deal with True North or another suitor is

inevitable.



But is it enough? Why, I ask, should Cordiant succeed on its own when

other aspiring independents such as Bozell, Lowe, TBWA and Snyder have

been forced to huddle together. Surely, given that Bates is most

assuredly not about the fashionable hub and spoke system, Bungey is not

saying he can grow a genuinely global business organically? He has,

after all, pledged to triple Bates’s income in three years.



’There’s no way we can reach the targets I’ve talked about to you

organically. When we first announced our plans post-demerger we had no

credibility, so we couldn’t talk acquisition,’ Bungey concedes. ’We had

to win the confidence of the markets and make our paper worth something

first. Sometimes I thought I was the only person who really believed

that we were not going to be acquired.’



’But,’ he continues, ’we had an ambitious set of shareholders who’d

agreed to the demerger and who agreed to ambitious targets. I thought it

would be unlikely that we’d receive a hostile bid too (the Publicis/True

North debacle helped in this respect). I don’t think a hostile bid would

work very well any longer in advertising.’



Is that hands off then? He does have a point in this world of global

partnerships and alliances. The flaw in his defence strategy remains the

paucity of global clients, the lack of which makes Bates vulnerable. As

ever, Bungey bristles at the suggestion the agency is lacking.



He lists BAT, Hyundai, Warner Lambert/Pfizer and Allied Domecq as the

global rocks upon which the business is built, plus key regional clients

such as Nokia, Heineken and HSBC in Asia, and Seat in Europe. However,

he does concede: ’By comparison with our major rivals, we have a long

way to go.’ Cordiant’s top ten clients provide only 30 per cent of

revenues. He sees this as an opportunity.



Bungey’s professed other targets include ratcheting up Cordiant’s

margins to 11 per cent (still a low figure by the industry averages),

increasing the percentage of revenue from below the line and, of course,

reforming and rebranding the group’s internet activities. He accepts

that Cordiant cannot be out there with the likes of Omnicom and WPP

brandishing chequebooks at dotcoms.



’Because we are so focused on our earnings and have so many things on

which to spend our cash, we really do demand a return on our investments

and it would seriously affect our earnings if we were out there

investing in things that don’t come to a profitable realisation. That’s

not to say we won’t be acquiring a great deal more than we have done in

the past.’



Bungey says he looked at the Snyder group but walked away because of the

price. He, like Snyder, was in healthcare long before it became

fashionable and long before the entire sector was re-evaluated by Wall

Street last year.



His roots are in point of sale. He is genuine in his desire to see the

global 141 network flourish and it is likely that it is in this arena

that many future acquisitions will be made. Gearing the whole

organisation towards an understanding of the dotcom era is also a

priority, Bungey says.



Although the share price has been steadily improving since the demerger

(Saatchis too), is it harder to make all the acquisitions such a

strategy depends on with a London listing (Cordiant is listed in London

and New York)?



’It’s only harder in the area of share options and incentives and they

are absolutely essential for doing business in a people business,’

Bungey replies. ’In the UK the guidelines were laid down for

manufacturing not service businesses. In the US, they can virtually

print options non-stop. It’s been very important to the growth of the

economy.’



’In the UK, there’s barely a week goes by where someone’s salary is not

reported,’ continues Bungey, himself a victim of such fat-cat headlines

in the past. ’In the US it’s like, so what? But if you can’t do your

job, you’re history. Everyone knows that. I think that’s healthier.’



Clearly seven years of living in the US have had an effect, although

Bungey stresses he leads a transatlantic life. He believes that he no

longer encounters the kind of anti-British prejudice that he did when he

first arrived - a legacy of the Saatchi takeover of Bates and other such

painful deals.



However, while he has been enjoying life in Manhattan’s swanky Dakota

building (once home to John Lennon), Bates UK has hardly gone from

strength to strength. Indeed, last month the former top three regular

dropped out of the UK top ten.



Dorland, BSB Dorland, Bates Dorland, Bates UK - the agency has gone

through almost as many management teams as it has name changes. Paul

Twivy and Andrew Cracknell, Twivy and Tim Ashton, Graham Hinton and Jay

Pond-Jones, Hinton and Cracknell, and now Cracknell and Toby Hoare have

all taken a turn at the helm since the agency’s heyday under Bungey and

Cracknell in the late 80s and early 90s.



Last year was a nightmare. It began with Hinton and Pond-Jones in

charge, went pear-shaped as Hinton tried to force through an integrated

restructure, bringing in Graham Green to run the new below-the-line

operation.



It saw an unhappy Pond-Jones replaced by Cracknell and ended with

Hinton’s deteriorating relationship with Bates’s European boss, Jean de

Yturbe, becoming public, resulting in the former’s inevitable

departure.



Bungey stands accused of saying yes to everyone and then going AWOL.



It’s how he got his ’Teflon Man’ nickname. As I write, the deposed

Hinton is planning yet another Bates lawsuit. What does Bungey make of

it all? His response explains the nickname.



’I don’t really want to talk about the past, but Graham and the company

will resolve the situation,’ he says, somewhat wearily. ’I don’t think

London has had that much of a revolving door compared to other agencies.

And there was never that much of a problem with the work.’



He distances himself from the fray neatly, hinting at Hinton’s spat with

de Yturbe by stating that under Hoare, who worked for him previously at

Dorland, ’London is once again at the heart of the European

operation.



We now have someone who I think is the best person to resolve the

situation in London. He has done a similar job at Young & Rubicam. I

think the hiring of Tim Broadbent (ex- Y&R planning director) is a good

start.’



And what of Cracknell, the man he dragged to the US against his better

judgment and with whom he subsequently fell out? The man who once

insisted on being chairman, a role which ground him down when he got his

wish at Ammirati Puris Lintas.



’He has got that out of his system now,’ Bungey says with a smile,

clearly pleased to have his old ally back doing what made him

famous.



Bungey, who looks tired and a touch careworn when discussing London,

comes alive when we return to his recent acquisitions: Healthworld, the

healthcare marketing group that will ’open up serious opportunities for

global relationships’ and the Korean agency, Diamond. He is a real

Korean enthusiast, perhaps because of the Hyundai relationship.



During our conversation, Bungey, while professing his belief in

independence, declines to rule out the possibility of a deal. His escape

clause is that, as head of a public company, he has a duty to listen to

all offers. The same applies to his attitude towards Zenith Media, in

which Saatchis and Cordiant have 50 per cent stakes.



So, with Bungey having covered his options, I suppose it’s up to us to

decide whether we believe Cordiant can stay independent. Certainly, he

has managed to fend off suitors and critics alike since the demerger.

All the numbers are moving in the right direction and the shareholders

must be satisfied with Cordiant’s performance to date.



However, the reality of today’s global business is that you can’t take

comfort in your company’s own relatively improved performance. While

Cordiant is coming back from the doldrums, advertising rivals have moved

on.



BDM has formed, FCB and Bozell have merged, as have Lowe and APL;

Publicis and Euro RSCG have both recently made significant acquisitions;

WPP has struck a deal with Asatsu; Omnicom is growing closer to

Hakuhodo. Where does Cordiant fit in with all this? Why should it (along

with Saatchi & Saatchi) be able to buck the market?



As successive London managers can attest, Bungey is extremely

plausible.



But it’s difficult to see how Cordiant will be the buyer in a major deal

(unless it first divests itself of its Zenith stake), nor remain

independent.



Bungey has been accused of many things over the years from being

’boring’ to treacherous over the Saatchi affair. But he sails on.

’What’s his secret?’ is a question we’re occasionally asked at

Campaign.



There is a clear answer to that. When no-one else around him cared about

Bates, Bungey did and, in return, Bates rewarded him.



What’s more, he is consistently underrated. But can he go all the way on

his own? One can’t help but believe that someday, something will

stick.



But Teflon Man has done a great job to date in proving us all wrong.



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