Will PHD’s expansion plan afford it enough European clout? John Owen
‘The only business we’ve lost has been because of international
realignments,’ says David Pattison, reflecting on the six years since he
launched Pattison Horswell Durden with Nick Horswell and Jonathan
Durden. ‘I’m not suggesting that having a network would defend that
business completely, but it would be nice to offer it as an option.’
Such is the globalisation of business these days, it came as no real
surprise when it emerged (Campaign, last week) that the UK’s most
successful independent media start-up of the 90s was on the verge of
signing up to an international network.
Since 1990, PHD has grown into a pounds 90 million-billing company,
whose clients are currently domestic-only advertisers. How much more
could it grow with international clients on board?
John Perriss, the chairman of Zenith Media Worldwide, says the move is
sensible. ‘PHD is virtually at the limit of clients who want servicing
in the UK only,’ he reasons. ‘If it’s going to grow, it’s got to offer
To be fair, it isn’t even that yet. With nothing signed, Pattison is
reluctant to discuss details, but the basic plan is as follows.
Debis Marketing Services, which is owned by the German car manufacturer,
Daimler-Benz, and Media Planning, Spain’s largest media independent, are
in the throes of building an equity-linked network across Europe. PHD
will become the UK part of that network, but - crucially for its
founders - not by selling a stake in the company. Instead, it will set
up a separately branded UK joint venture with the network owners. This
operation will subcontract all UK media planning and buying for its
clients to PHD.
Orion International Media Solutions, the holding company set up to
acquire the network by the German and Spanish partners, has already
acquired a 25 per cent stake in the Dutch operation, MI Media
Independent. Discussions are also ongoing with top-drawer media shops in
France and Italy.
As Pattison observes, this will probably be the last European media
network launch. So it had better be a good one.
The darkest shadow over the venture is cast by Daimler-Benz itself,
which last month recorded losses of pounds 2.7 billion. Last week it
pulled the plug on the Dutch aircraft maker, Fokker, in which it has a
majority shareholding. The Dutch Government was forced to intervene as
Daimler’s chairman, Jurgen Schrempp, proclaimed: ‘Profitability in all
fields of business is the first priority for the group. Any strategies
which do not unequivocally support that priority are unacceptable.’
Given the low margins in media, some believe Debis may also come under
the microscope. ‘It’s a fair point,’ Pattison admits, ‘but I can’t worry
about that. All I can do is make sure I protect PHD in any arrangement I
make.’ Hence the arm’s-length distance of the joint venture deal.
More important for Pattison is the cultural fit with Media Planning and
Debis’s well-regarded German media planning and buying arm, Debis GFMO.
But these credentials have not gone unquestioned. Some suggest that car
manufacturers and banks (a variety of which control Media Planning) are
unlikely to be blessed with the strategic know-how to drive a new
network championing quality media thinking.
But Pattison has no doubts about his prospective partners. ‘We felt
extremely comfortable almost immediately we met them,’ he says, ‘with
both the individuals and with the product they produce.’
The fact remains, however, that this is their network, not PHD’s. Some,
like the CIA chairman, Chris Ingram, believe this is a fundamental
point. ‘Unless PHD is at the top, helping to drive it, the deal is that
PHD is providing the UK resource to somebody else’s network,’ he
Pattison is aware of the problem. ‘We will only go into it on the
understanding that we have some level of influence over the overall
network,’ he states.
The most likely areas in which PHD will play a role are quality control
and new business, he says. But the choice of partners to expand the
network will be down to Debis and Media Planning - for, as Pattison
points out, ‘it’s not our money that’s buying them’.
And there’s the rub. As all those who have been there before testify,
exerting an influence on partners in which you have no stake is a big
problem. Of course, much will depend on PHD’s relationship with the
Spaniards and the Germans. The fact that they are willing to veer from
their policy of buying into partners to bring PHD on board is a measure
of the respect with which they hold it.
Certainly, Pattison is adamant that PHD will hold the strategic reins
for its own UK-based clients. And, where multinationals have come into
the UK as part of a bigger deal, PHD will have direct contact with the
client’s marketing department in the UK.
But Iain Jacob, international media director at Motive, believes a
strong central management function will be essential to the network.
‘International clients want the whole process to be managed to a degree
which goes beyond co-ordination. They’re looking for added value in
terms of a strategic approach,’ he points out.
PHD’s influence on that centre will only become apparent as the network
becomes operational. On its success will depend the next and most
difficult stage of PHD’s development.