The planned merger of Leo Burnett’s media interests with those of
the DMB&B holding company, MacManus, under a new global media brand has
collapsed at the 11th hour amid a clash of personalities and
disagreement over the structure of the new company.
A formal announcement confirming the merger was expected next week, but
talks broke down late on Tuesday evening and both parties decided to
call off negotiations.
The failure of the merger at such a late stage, after a number of joint
media pitches around the world and the involvement of key clients in the
plans for the new company, is seen as acutely embarrassing for both
parties.
An official statement issued this week blamed the deal’s collapse on
irreparable differences of opinion. According to Rick Fizdale, the
chairman and chief executive of Burnetts, the problems centred on the
structure of the merged operations in the US.
Fizdale said: ’While we have a great deal of respect for the people at
MacManus, we had enough fundamental differences of opinion on how best
to run such a massive operation, especially in the US, that we’ve both
chosen not to move forward.’
The idea had been to pool MacManus’s MediaVest and TeleVest brands with
Burnetts’ media operations to form a global media company called
StarVest (Campaign, 6 March). There had been a good fit between the two
companies - both roster media agencies for Procter & Gamble
internationally - and a merger would have helped lever greater
efficiencies and provided a stronger network for global clients such as
P&G and McDonald’s.
While a merger would not have propelled the combined agencies into the
top three of global media operations, it would have made them more
competitive on the international media stage; and both are being
increasingly marginalised as competitors such as WPP, Omnicom and
Interpublic Group flex their global media muscle.
The momentum for the merger had originally come from the US, where both
agencies are headquartered. The UK media companies were encouraged to
take a lead in providing a blueprint for the merged company.
MediaVest and Burnetts’ media in the UK have been working closely
together, co-operating on the pitch for P&G’s pounds 200 million media
business and setting a 1 February 1999 date for the launch of the UK
agency.
Both parties are said to be extremely disappointed that the merger has
now been called off by their US parents.
But a Burnetts UK media independent under the StarCom brand - the name
used by its US media operation - has not been ruled out. With pounds 170
million of UK P&G business under its belt, Burnetts’ media is now in a
stronger position to launch as a standalone operation.
However, the breakdown of talks leaves MacManus’s media strategy in
tatters.
Since launching the MediaVest brand in 1997, the company has failed to
develop a coherent European network.
Meanwhile, the UK agency has this week lost the pounds 9 million KFC
media business, which reviewed as it would have clashed with Burnetts’
McDonald’s media account.
By pitching jointly with Burnetts, MediaVest also lost out in the P&G
review - emerging with only the pounds 2 million radio business. But
Bernard Balderston, P&G’s media manager, said the collapse of the merger
plans would not affect P&G’s media accounts.
According to MediaVest’s UK chief executive, Jim Marshall, a UK merger
would have brought real benefits.
’We knew we could make it work successfully in the UK and the fact that
it is not happening is very disappointing. It’s ironic that the deal
fell down in the US, since that’s where it all started,’ he said.
