Under the terms of the deal, BMB will continue to be run by its founders, at least for now, and will expand globally with a New York office to open in the first half of 2009, and further launches planned in Singapore and South America.
BMB’s co-founder Trevor Beattie said: It’s the perfect deal. It was irresistible for us because we get to expand globally.
The chance to go East is very important right now, and this deal not only allows us to look East, but also expand in the West. What’s not to like?
One answer to that question is that the deal puts BMB in the potentially invidious position of being part-owned by one of its clients.
Samsung is a significant shareholder in Cheil, holding around 20 per cent of the shares in the publicly listed company.
BMB is set to inherit the £20 million UK advertising account for Samsung, the majority of which is currently handled by CHI & Partners.
Critics suggest this relationship could pose problems: will potential clients see it as a conflict of interest. If BMB wins Samsung, will servicing that account take precedence?
Further questions also surround the future ownership of the business.
Cheil has an option to buy a controlling stake in BMB if certain financial targets are met.
Bruce Haines, the Cheil global chief, said: We want them to grow the business with our backing; we don’t want to interfere.
"So many companies kill the agencies they buy and we don’t want to do that. But if you have 49 per cent then you obviously want your voice to be heard.
The price tag
Neither Cheil nor BMB will be drawn on the exact price, but insiders say the South Korean agency is likely to have paid a premium, not least because of the experience and reputation of the BMB team.
When the Omnicom deal broke down, some suggested that it fell apart because of price – Omnicom is notoriously unwilling to pay a multiple of more than six to eight.
According to figures filed at Companies House, BMB’s operating profit for 2007 was £1.1 million, on billings of around £52 million.
Cheil, however, could conceivably have paid a multiple of up to ten, and may also have done the deal based on forecast figures for 2008, when BMB added another £63 million in billings.
Bob Willott, a director of the financial analysts Fintillect, said: Ten times pre-tax profit is generous but it’s entirely conceivable that a company like Cheil would pay that.
Haines would only comment: BMB is a premium brand and I was happy to pay a price to incentivise them to grow the business further.
The rise of BMB
May 2005 BMB launches with French Connection as its founding client
July 2005 BMB scores first big win with £6 million HP Foods creative account
September 2005 Lands £4 million First Choice account
February 2006 Wins Carling’s £7 million ad brief
May 2006 McCain shifts £15 million ad account out of TBWA\London and into BMB
August 2006 Fcuk moves account to Yellow Door
November 2006 Loses Heinz business to McCann Erickson
June 2007 Picks up £5 million Ikea UK ad account
November 2007 Lands £7.5 million Wall’s sausages account
December 2007 Snatches ?£23 million Thomson account from Krow
March 2008 Scoops £14 million ING Direct ad account and Virgin Money business
July 2008 Launches Carling iPint application for iPhone
September 2008 Omnicom begins talks to buy BMB in a bid to strengthen TBWA\London
October 2008 Hottrix files lawsuit in the US for copyright infringement of its iBeer application
October 2008 Talks with Omnicom break down
November 2008 Cheil signs deal to buy 49 per cent stake ?in BMB
LONDON - On Monday morning, just two months after talks with Omnicom broke down, the staff at Beattie McGuinness Bungay gathered to receive the news via satellite link from South Korea that the agency had sold a 49 per cent stake to Cheil Worldwide.