CLOSE-UP: LIVE ISSUE/EHS BRANN - Ehsrealtime's merger with Brann will give the agency added clout

Havas' UK direct marketing operations are many and varied but, last

week, the picture was simplified somewhat with the announcement of the

merger between ehsrealtime and Brann.



If you believe the management of the new agency, there are clear

strategic reasons for the merger but more cynical observers might

suggest that base motivations such as cost-cutting and efficiencies lie

behind the move.



First, the case in defence of EHS Brann's strategic claims. Ehsrealtime

was a large agency, employing about 270 staff, and had a strong heritage

in creative direct marketing fused with Real Time's digital

capabilities.



However, though it dabbled in international work, it had no

international network and its most distant satellite was an office in

Leeds. So it makes sense, doesn't it, to merge a strong London agency

with Brann, which has a worldwide network, especially strong in Europe,

but is less strong in London?



This is the scenario painted by Terry Hunt, the chairman of EHS Brann,

and his new boss Roy Boss, the European president and chief operating

officer of Brann Worldwide. The merger creates an agency with 400 staff

and a turnover exceeding £70 million, which, according to Hunt and

Boss, makes it the largest DM agency in Europe. Erm, not quite.



In the UK alone, WWAV Rapp Collins London is larger on the basis of

turnover (£79 million). However, the deal does give EHS Brann more

muscle in the UK and brings EHS' creative and digital skills to the

network. In Hunt's words: "Brann is a very strong agency in the UK -

strong in Cirencester, less strong in London, so there is a good reason

for the merger; to be strong in London, Cirencester and Leeds. There is

also Brann Worldwide. All of a sudden we get the opportunity to work

with, and influence, an international network."



But now the case for the prosecution. Boss and Hunt have been talking

for more than a year about a possible merger. This seems sensible given

EHS's need to link with a network but on Brann's side talks coincided

with deepening problems with its London agency. Boss admitted that the

London agency, launched in 1996, had never lived up to his initial

expectations. Clearly he had to do something about this and a merger

with a stronger London agency seemed like a good solution. However, you

could take the view that merging a weak London agency with EHS is not

exactly a cocktail to set hearts racing.



The failure of Brann London is the key to this merger. The agency lost a

succession of managing directors (Mike Oliver, Paul Kitcatt and Dennis

Kerslake), who all failed to make a go of the operation. There was a

suspicion that Brann's Bristol- and Cirencester- focused operations,

with their heart in data and telemarketing, held back Brann London

because of mutual suspicion. The truth probably lies closer to

perception of Brann as a process-driven systems supplier that works

against any London-based creative agen-cy carrying its name. Some in the

industry believe that Brann's culture and systems-led approach could

stifle EHS in the same way.



The heads of other top ten DM agencies don't seem too worried by the

creation of EHS Brann. The belief at other agencies is that the deal is

driven by financial, rather than strategic, concerns. Smaller agencies

believe that the deal creates a gap in the middle market and could lead

to more new-business opportunities for them.



Word of redundancies at Brann and a review by BMW of its account with

EHS, because of a conflict with Brann's Peugeot account, is already

circulating. However, in the long term, the move won't weaken EHS in

London and gives Hunt the clout he needs to strengthen the agency. On

balance, the reasons for the merger may not be entirely positive, but it

is the right move.



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