Late last year Campaign took an in-depth look at three of the fastest growing new-generation international communications groups - Snyder Communications, Mosaic Group and Lighthouse Global Network. Trailing a long way behind the likes of WPP, Omnicom and Interpublic, all three had nevertheless been very aggressive with their acquisition strategies over the previous two or three years, especially in below-the-line areas like direct marketing. The key question was: how big could they get?
Andrew Melsom, the founder of the consultancy Agency Insight and a seasoned observer of the marketing services scene, took a cynical view. In three to five years' time, he said, organisations such as WPP would be buying groups rather than agencies. When that happened, the so-called next generation would be vulnerable to acquisition.
'After all,' he added, 'isn't that the plan?'
All he got wrong was the timing. WPP has demonstrated its appetite for big targets this year with its takeover of Young & Rubicam. Meanwhile, Havas was due to complete its drawn-out purchase of Snyder last week, while Cordiant has snapped up Lighthouse - a move that means, among other things, that the DM/SP agency Communicator will be merged into Bates' 141 Communications.
The past year has seen a number of other takeovers and mergers (see panel, p5). And it's a continuing trend. Just last month, the multi-discipline agency Interfocus announced a management buyout from the Lowe Group, transferring a majority stake to the publicly quoted Canadian group Maxxcom, and buying Osprey London.
And there's clearly room for further rationalisation, even if many of the biggest and best individual agencies have already forfeited their independence. A study of Willott Kingston Smith's latest direct marketing league table with this article (p4) shows there is not an independent left in the top 20.
That's not to say there are no attractive UK targets, with good creative and business records. In each of the past three years, for instance, the overall winner in the Direct Marketing Association awards has been an independent - DP&A for Goldfish in 1997, Rapier for Cable & Wireless in 1998, and Clark McKay Walpole for Hyundai in 1999. All get regular invitations to join one or other of the global communications networks.
The most courted of the remaining takeover candidates, however, are playing hard to get. Most say they value their independence, and still have things to achieve. But as Mike Cornwell, the chief executive of TBWA GGT Direct, points out, it is not in their interests to sell at the moment, either.
'The market is buoyant,' he says. 'Unless someone comes along with an urgent, strategic imperative that means they have to buy now, even at a silly price, the independents will continue to knock back all the advances.'
Fortunately, acquisition is not the only route to growth. There's still a lot of client demand for direct marketing - and a broadening definition of what the term covers.
Thus Cornwell can say of his agency: 'We are increasingly involved in the digital channels because clients are finally realising that, fundamentally, it's direct marketing.'
Internet and new-media skills are just part of the story, although a very important part. Below-the-line agencies appear to be adding new disciplines and new departments, or striking alliances with specialists, at every turn.
Clients themselves are increasingly aware of the importance of having an agency with a wide range of skills. Peter Thompson, the chairman of Joshua, says that this can mean a solution that has integrity.
'More and more clients are looking for strategic advice that genuinely makes a difference to their business,' he adds. 'It sounds obvious but everyone is focused on results now and looking for effectiveness much more than they did in the past. Agencies steeped in direct marketing are used to that.'
Triangle's heritage is in sales promotion, and the chairman, Kevin Twittey, is the first to admit it is not seen as a classic DM agency. Yet one of its major contracts is to send a quarterly mailer, with targeted offers, to 2.2 million TSB cardholders.
'Clients are not interested in what label you wear,' he says. 'They want initiatives that impact on their business and they don't care what form that takes. Increasingly, we find companies have a budget of pounds x to address particular issues and they'll put the brief to an ad agency, a DM agency, a sales promotion agency and even an internet specialist.'
Terry Hunt, the chairman of ehsrealtime, points to the fact that a number of accounts that have been seen as the preserve of ad agencies have recently gone to DM shops - such as Jersey Tourist Board, won by TBWA GGT Direct.
Perspectives, bought by WPP a year ago, runs an integrated campaign for Eurobell, embracing everything from logo design to direct mail, posters and TV commercials.
Saab, similarly, has a cinema commercial on screens at the moment. It was made by Lowe Direct, whose managing partner, Tony Watson, confirms that client needs are dictating an increasingly diverse approach from agencies. He points in particular to more international work, more involvement with packaged goods brands, more new media, and more conventional advertising.
'These days, you have to be widely knowledgeable,' Watson adds. 'Agencies have to respond to this demand for increasing diversity. You can't ignore it.'
Besides diversifying, several of the big agencies are adding consultancy strengths to increase their potential for adding value. An example is the Y&R offshoot Impiric (the new name for Wunderman Cato Johnson). Impiric, whose failure to provide auditors' confirmation of their accounts disqualified it from inclusion in the table on page 4, would otherwise top the league with turnover of pounds 59 million in 1999.
The agency has taken the drastic step of abandoning one of the best-known brands in the business 'to reflect changes already in place', as its managing director, Richard Bagnall-Smith, puts it.
As a result of the Y&R takeover, Impiric now finds itself a sister agency within WPP to its long-standing rival OgilvyOne.
Both are striving to establish unique positionings in the market, although the truth is that the differences can be seen primarily as a matter of emphasis.
Thus OgilvyOne's chairman, Nigel Howlett, says: 'This year feels like the most significant yet in terms of the balance of our business, and the main driver in that is the demand for interactive capability.' The agency's team of interactive specialists has tripled in size to 150.
Yet at the same time he can point to a restructuring of the agency's substantial consultancy arm to form a customer relationship management (CRM) practice, responsible for overall one-to-one strategies, including e-business.
Bagnall-Smith, on the other hand, stresses the prime role of CRM in Impiric's positioning, but says the agency is now doing as much work online as offline.
He claims it is involved in the interactive activities of 80 per cent of its clients.
Similar strategies are being pursued in other agencies, and one of the arguments revolves around whether interactive specialists should be in a separate team, even a separate agency, or mixed in with everyone else.
It can pose a dilemma for the international networks, when everyone in marketing services appreciates the importance of the new disciplines.
Bates Interactive, for instance, was part of 141 Communications but has been relaunched as a separate network, CCG.XM, reporting directly to New York. Until he resigned recently, the move had 141's managing director, Jeremy Shaw, stressing that XM continues to share the same building in London, with the two agencies working closely together on developing interactive strategies for a number of major clients.
John Shaw, the managing director (European agencies) at Brann, has pursued the integration route. He says Brann now frequently deploys creative teams consisting of three - an art director, a copywriter and an interactive specialist.
Lowe Direct is another that has resisted what it regards as separate 'new-media ghettos'. Evans Hunt Scott has merged with the digital design agency realtime to form ehsrealtime, and its chairman, Hunt, stresses that it is a true merger, with every department from creative to account handling brought together.
On the other hand, WWAV Rapp Collins has probably been making a strategic point - akin to WCJ and O&M Direct changing their names - by establishing a couple of high-profile offshoots. Zalpha is its CRM consultancy, built around an enhanced planning department. But the agency has also set up an interactive unit, based on a strategic partnership with a leading-edge US agency, Isis.
WWAV's business suffered in 1999, not least because a string of City takeovers together with the dotcom phenomenon created uncertainty among its many financial services clients.
This year, its group chief executive, Chris Gordon, claims, the group is experiencing double-digit growth, thanks to increased client spend and the success of the Zalpha and new-media initiatives.
DIRECT TIES: ROBERT GRAY PROFILES THE MERGERS AMONG THE TOP 40 agencies IN THE LAST YEAR
EHSREALTIME
In July 2000, Havas merged the DM specialist Evans Hunt Scott with the digital agency realtime to create ehsrealtime.
The combined agency has a turnover of pounds 63 million and employs 303 people. Clients include Tesco, BMW, British Gas, National Savings, Diesel, Canon Europa, COI and Buzz.
The chairman, Terry Hunt, the chief executive, Andrew Harris, and the managing director, Louise Wall, are former EHS staff, while the vice-chairman, Phil Jones, and the commercial director, Allison McSparron-Edwards, have come from realtime. The digital director, Peter Pedersen, departed in the wake of the merger.
Wall says: 'We are providing a leading-edge, future-proof agency that puts the customer at the heart of every communication.'
MOSAIC'S PROJECT COLOUR
Mosaic Group, the Canadian marketing services network, is to merge its four UK agencies - stretch the horizon, ZGC, Dialogue ZGC and Creative IQ - in order to become a top-ten DM player. The merger will take effect on 1 January next year. The new entity is being referred to as Project Colour and is being run by the managing director, Samantha Smith, who joined in August from FCA!. The agency will employ about 160 staff and work for clients including Coca-Cola, Barclays and Barcardi.
A client audit identified demand for the four agencies to share their expertise. Smith says: 'They wanted all the agencies to join together, to add more specialist skills and to give a more holistic approach.'
CLAYDON HEELEY JONES MASON
In 1999, the Omnicom agency Claydon Heeley launched the DM offshoot Jones Mason Barton Antenen as a joint venture with BMP DDB. On 1 February this year, the two entities were brought together again. Jon Claydon is the chairman with Nigel Jones and Edward Mason as joint chief executives. The creative director, Rob Scott, is from CH, while his number two, Rod Marsh, is ex JMBA. JMBA founders Steve Barton and Simon Antenen have both left.
The merged agency has 210 staff and clients such as BA, Pepsi, Unilever, PlayStation, Compaq and Credit Suisse.
Claydon says: 'Jones Mason was hard-wired into BMP and DDB, which gave it a planning firepower that we weren't set up to replicate.'
CLARKE HOOPER MOMENTUM
On 1 January 2000, Abbott Mead Vickers BBDO merged the below-the-line agencies Clarke Hooper and Momentum. Annual billings are about pounds 30 million and clients include BT Cellnet, BT Global Mobile, Ordnance Survey, Yellow Pages, Volvo, Jet, Mars and Gillette. Clarke Hooper people took the top jobs with Barry Clarke becoming the chairman, Andrew Roberts the chief executive and Warren Moore the creative director.
Ian Jacob, formerly the chairman and chief executive of Momentum, is now the chief executive of another Omnicom group company Alcone UK, while the vice-chairman, Ed Downey, left to form his own agency.
The company now reports to Proximity London, which was formed on 1 July this year, and brings together the CRM and promotional marketing interests of the AMV Group. Clarke says: 'Clarke Hooper Momentum was a sensible first step in strengthening the overall creative and client service resources within AMV's promotion marketing companies.
'We have taken the process a stage further with the creation of Proximity London and the Proximity Worldwide Network to provide clients with a high level of expertise across all brand communications on- and offline.'
PROMOTIONAL CAMPAIGNS GROUP/DIALOGUE MARKETING PARTNERSHIP
The WPP-owned Ogilvy Group acquired Dialogue Marketing Partnership this summer and intends to merge it with Promotional Campaigns Group early next year. The name and management structure remain unclear but the 60-strong agency will have offices in London, Henley and Hampton Court.
PCG's chief executive, Hugh Taylor, and Dialogue's chief executive, Richard Church, are expected to have senior roles. Clients will include Bestfoods, IBM, Amex, AA, Gillette and Duracell. Taylor says: 'The breadth of offer expected from a below-the-line agency is much broader these days.'
THE TOP 40 DIRECT MARKETING AGENCIES
Rank Company name Year end Year end
latest previous
1 WWAV Rapp Collins 31 Dec 99 31 Dec 98
2 Colleagues Group 31 Dec 99 31 Dec 98
3 Carlson Marketing Group 31 Dec 98 31 Dec 97
4 Brann 31 Dec 98 31 Dec 97
5 OgilvyOne Worldwide 31 Dec 99 31 Dec 98
6 Joshua 30 Sep 99 30 Sep 98
7 IMP 31 Dec 98 31 Dec 97
8 Barraclough Hall Woolston Gray 31 Dec 99 31 Dec 98
9 Evans Hunt Scott Eurocom 31 Dec 98 31 Dec 97
10 Tequila UK 30 Dec 98 30 Apr 98
11 The Marketing Organisation 31 Dec 99 31 Dec 98
12 Citigate Albert Frank 28 Feb 99 28 Feb 98
13 The Triangle Group 31 Dec 98 31 Dec 97
14 KLP 31 Dec 99 31 Dec 98
15 Claydon Heeley International 31 Dec 98 31 Dec 97
16 Clarke Hooper Consulting 31 Dec 98 31 Dec 97
17 WWAV Rapp Collins North 31 Dec 98 31 Dec 97
18 Interfocus Network 31 Dec 99 31 Dec 98
19 Tequila Payne Stracey 31 Dec 98 31 Dec 97
20 WWAV Rapp Collins Scotland 31 Dec 99 31 Dec 98
21 Craik Jones Watson Mitchell Voelkel 31 Dec 98 31 Dec 97
22 GGT Direct Advertising 31 Dec 98 30 Apr 98
23 Lowe Direct 31 Dec 99 31 Dec 98
24 Judith Donovan Associates 31 Dec 99 31 Dec 98
25 Momentum Integrated Communications 31 Dec 98 31 Dec 97
26 1995 Ventures 31 Dec 99 31 Dec 98
27 Target Direct Marketing 31 Aug 99 31 Aug 98
28 Haygarth Promotional Marketing 31 Mar 99 31 Mar 98
29 Marketing Perspectives 30 Sep 98 30 Sep 97
30 Marketing Drive 31 Dec 98 31 Dec 97
31 Rapier 31 Dec 98 31 Dec 97
32 Team LGM 28 Feb 99 28 Feb 98
33 Tullo Marshall Warren 31 Dec 98 31 Dec 97
34 Black Cat Agency 31 Oct 99 31 Oct 98
35 stretch the horizon 31 Dec 98 31 Dec 97
36 Zimmer Gellett Constantinou 31 Dec 98 31 Dec 97
37 141 Blue Skies 31 Dec 98 31 Dec 97
38 FFWD Precision Marketing 30 Sep 99 30 Sep 98
39 Billington Cartmell 31 Dec 98 31 Dec 97
40 Cramm Francis Woolf 31 Dec 98 31 Dec 97
Company name Turnover Turnover Change
latest previous (%)
(pounds (pounds
000) 000)
1 WWAV Rapp Collins 57,966 71,374 -18.79
2 Colleagues Group 54,910 43,501 26.23
3 Carlson Marketing Group 49,043 43,408 12.98
4 Brann 47,706 43,782 8.96
5 OgilvyOne Worldwide 43,345 28,994 49.50
6 Joshua 38,005 37,721 0.75
7 IMP 36,200 41,874 -13.55
8 Barraclough Hall Woolston Gray 33,813 25,308 33.61
9 Evans Hunt Scott Eurocom 32,962 36,831 -10.50
10 Tequila UK 30,111 18,164 65.77
11 The Marketing Organisation 26,447 22,371 18.22
12 Citigate Albert Frank 19,015 13,582 40.00
13 The Triangle Group 17,989 14,747 21.98
14 KLP 16,651 20,007 -16.77
15 Claydon Heeley International 16,178 10,120 59.86
16 Clarke Hooper Consulting 16,024 12,504 28.15
17 WWAV Rapp Collins North 15,975 17,018 -6.13
18 Interfocus Network 14,525 16,315 -10.97
19 Tequila Payne Stracey 13,200 13,058 1.09
20 WWAV Rapp Collins Scotland 12,355 11,884 3.96
21 Craik Jones Watson Mitchell Voelkel 11,951 8,880 34.58
22 GGT Direct Advertising 11,516 10,439 10.32
23 Lowe Direct 11,475 8,307 38.14
24 Judith Donovan Associates 11,100 11,340 -2.12
25 Momentum Integrated Communications 10,587 10,143 4.38
26 1995 Ventures 9,848 9,684 1.69
27 Target Direct Marketing 9,783 8,293 17.97
28 Haygarth Promotional Marketing 9,689 8,523 13.68
29 Marketing Perspectives 9,457 5,848 61.71
30 Marketing Drive 8,185 5,875 39.32
31 Rapier 7,803 9,822 -20.56
32 Team LGM 6,902 6,363 8.47
33 Tullo Marshall Warren 6,519 5,373 21.33
34 Black Cat Agency 6,354 6,381 -0.42
35 stretch the horizon 6,344 7,654 -17.12
36 Zimmer Gellett Constantinou 6,224 5,946 4.68
37 141 Blue Skies 6,206 5,556 11.70
38 FFWD Precision Marketing 5,037 3,380 49.02
39 Billington Cartmell - - -
40 Cramm Francis Woolf - - -
Company name Pre-tax profit Change
latest previous (%)
(pounds (pounds
000) 000)
1 WWAV Rapp Collins 4,364 4,951 -11.86
2 Colleagues Group 3,325 2,092 58.94
3 Carlson Marketing Group 2,799 999 180.18
4 Brann 4,210 1,955 115.35
5 OgilvyOne Worldwide 3,851 2,633 46.26
6 Joshua 794 1,086 -26.89
7 IMP 1,916 2,149 -10.84
8 Barraclough Hall Woolston Gray 2,012 2,134 -5.72
9 Evans Hunt Scott Eurocom 1,111 1,279 -13.14
10 Tequila UK 350 -1,385 125.27
11 The Marketing Organisation 971 771 25.94
12 Citigate Albert Frank -83 704 -111.79
13 The Triangle Group 614 526 16.73
14 KLP 823 661 24.51
15 Claydon Heeley International 2,322 990 134.55
16 Clarke Hooper Consulting 1,685 1,106 52.35
17 WWAV Rapp Collins North 622 617 0.81
18 Interfocus Network 1,158 1,129 2.57
19 Tequila Payne Stracey 508 892 -43.05
20 WWAV Rapp Collins Scotland 742 469 58.21
21 Craik Jones Watson Mitchell Voelkel 543 13 4076.92
22 GGT Direct Advertising 342 393 -12.98
23 Lowe Direct -177 -1,137 84.43
24 Judith Donovan Associates 428 495 -13.54
25 Momentum Integrated Communications 1,046 954 9.64
26 1995 Ventures 689 636 8.33
27 Target Direct Marketing 215 155 38.71
28 Haygarth Promotional Marketing 1,343 925 45.19
29 Marketing Perspectives 670 148 352.70
30 Marketing Drive 1,398 1,156 20.93
31 Rapier 150 1,185 -87.34
32 Team LGM 189 321 -41.12
33 Tullo Marshall Warren 376 164 129.27
34 Black Cat Agency 127 88 44.32
35 stretch the horizon 1,414 799 76.97
36 Zimmer Gellett Constantinou 337 151 123.18
37 141 Blue Skies 1,340 842 59.14
38 FFWD Precision Marketing 767 235 226.38
39 Billington Cartmell 718 737 -2.58
40 Cramm Francis Woolf 370 427 -13.35
Company name Turnover per head Change
latest previous (%)
(pounds) (pounds)
1 WWAV Rapp Collins 222,235 274,515 -7.39
2 Colleagues Group 453,802 348,008 30.40
3 Carlson Marketing Group 134,364 121,591 10.51
4 Brann 49,539 53,458 -7.33
5 OgilvyOne Worldwide 201,605 204,183 -1.26
6 Joshua 190,980 205,006 -6.84
7 IMP 244,595 282,932 -13.55
8 Barraclough Hall Woolston Gray 163,348 129,122 26.51
9 Evans Hunt Scott Eurocom 177,215 216,653 -18.20
10 Tequila UK 298,129 248,822 19.82
11 The Marketing Organisation 211,576 199,741 5.93
12 Citigate Albert Frank 288,106 266,314 8.18
13 The Triangle Group 109,024 103,126 5.72
14 KLP 120,659 140,894 -14.36
15 Claydon Heeley International 188,116 136,757 37.56
16 Clarke Hooper Consulting 258,452 235,925 9.55
17 WWAV Rapp Collins North 319,500 354,542 -9.88
18 Interfocus Network 149,742 153,915 -2.71
19 Tequila Payne Stracey 159,036 171,816 -7.44
20 WWAV Rapp Collins Scotland 287,326 339,543 -15.38
21 Craik Jones Watson Mitchell Voelkel 243,898 227,692 7.12
22 GGT Direct Advertising 143,950 179,983 -20.02
23 Lowe Direct 182,143 153,833 18.40
24 Judith Donovan Associates 201,818 185,902 8.56
25 Momentum Integrated Communications 211,740 211,313 0.20
26 1995 Ventures 193,098 225,209 -14.26
27 Target Direct Marketing 171,632 129,578 32.45
28 Haygarth Promotional Marketing 276,829 266,344 3.94
29 Marketing Perspectives 193,000 132,909 45.21
30 Marketing Drive 199,634 163,194 22.33
31 Rapier 139,339 196,440 -29.07
32 Team LGM 135,333 171,973 -21.31
33 Tullo Marshall Warren 105,145 111,938 -6.07
34 Black Cat Agency - - -
35 stretch the horizon 181,257 239,188 -24.22
36 Zimmer Gellett Constantinou 127,020 135,136 -6.01
37 141 Blue Skies 121,686 101,018 20.46
38 FFWD Precision Marketing - - -
39 Billington Cartmell - - -
40 Cramm Francis Woolf - - -
