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
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
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
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
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
'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
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
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
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
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
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
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
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
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
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
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
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
But Teflon Man has done a great job to date in proving us all wrong.
- This article ran in March 2000. One year on, Cordiant remains
independent but is the subject of constant rumours.