CLOSE-UP: LIVE ISSUE - When the bottom line means a new agency identity

Agencies are vulnerable in such a capricious industry, Francesca Newland writes.

Most advertising agency bosses hope never to come into contact with administrators but few who have run their own business can have avoided the occasional sleepless night.

Agencies are fragile businesses. Client reviews can be ruthless and unpredictable, a factor that gave rise to the oft-quoted piece of wisdom "any agency, even the best in town, is only ever three calls away from disaster".

Another factor that makes agencies vulnerable can be the egos and pride of their principals. Careful management of the human factor can enable an agency to pull a business back from the brink by selling up.

Bob Willott, the editor of the newsletter Marketing Services Financial Intelligence, believes it is better to enter a sale or merger than go into administration and become what is known as a "phoenix" operation.

"It gets to the point where the most important thing is for the business to survive. When a commercial deal is made, where a buyer will take on the agency's clients, it reassures everyone," Willott says.

He points to WPP's recent acquisition of the Cordiant network as an example.

A substantial portion of Cordiant's clients moved into WPP's agencies, which also took on many Cordiant staff to service these newly acquired pieces of client business.

But cancelling debts by going into administration before reopening under a new name has one obvious advantage - it can maintain an agency's independence. This process can be time-consuming for an agency's management when at the same time it needs to service existing clients and win new ones.

Willott's advice is clear: "If you get into financial difficulties, don't leave it too long and don't let your personal pride get in the way."

Here are four case studies, from 1992 to the present, showing how agencies negotiated their way through the issues.


At the end of last year, while most people were preoccupied with their plans for Christmas, Tim Delaney, the chairman of Leagas Delaney, had other things on his mind.

Delaney, widely regarded as one of the most talented copywriters in the UK, founded Leagas Delaney in 1980.

Since then, the agency has produced some of the industry's finest work for clients including Timberland, Adidas and the BBC.

However, by the end of last year all was not well. Its San Francisco operation was sold and Delaney had fallen out with its management. The French arm was also suffering. Its creative director, Pascal Gregoire, was leaving and is now exchanging legal letters with Delaney. The global Clarins account was reviewing, and the prestigious Ikea account, for which the agency came close to winning the Grand Prix in Cannes in 2002, was moving. The Paris agency is currently seeking a merger partner.

Although its Italian and German operations are still healthy businesses, the agency has also been losing status in its home market. Its business includes the Nationwide, Hyundai (currently under review), Goodyear Dunlop Tyres, Patek Phillippe, Intercontinental Hotels, Opodo, Pilsner Urquell, Tanner Krolle, Salomon and the recently won Dom Perignon.

For the agency formerly positioned as a specialist in luxury goods advertising, its win of the £4 million Poundstretcher account last year, although a welcome potential source of income, signalled how much things had changed.

Numerous redundancies have seen its staff numbers shrink within its impressive Alfred Place premises.

It is a painful situation to be in, especially since only three years before it was close to a deal with the Canadian company Envoy valuing the agency at £60 million.

By the end of last year Delaney, together with his managing director, Margaret Johnson, was talking to the agency's bank Lloyds TSB.

They brought in KPMG and were advised to rename themselves (TM London and TM Limited).

The new TM operation was shut down and a new, unburdened, Leagas Delaney - London Limited was born (Campaign, last week).

Creditors were sent letters from the administrators Grant Thornton informing them of the changes.

Delaney says: "This move was principally designed help us exit the US market. Our clients just want us to do great work for them - now we can get on with it."


Bean Andrews Norways Cramphorn had an inauspicious start to life. It was formed in 1996 by two disaffected founders of Bean MC, which itself had only been founded 18 months previously.

Known as Banc, the new agency's launch ethos was to provide both design and advertising solutions for clients.

Over the next few years, it won several prestigious clients including Lindt, The Body Shop, Liberty and Emap Metro, but none of them could offer long-term security.

By the beginning of 2003, its client list was dangerously short: Young's Brewery and the Liberal Democrats being its more prominent accounts.

It appears that the agency's books were unable to cope with the pressures of the downturn, and last July the liquidators were called in following its sale to Media Square.

Its Young's Brewery account is now in review and Media Square is preparing to unveil a new identity for its agencies next month.


Creditors were up in arms over the folding of Priestley Marin-Guzman and Gluck in March 1992 and the news that two of its partners were forming a new agency which would operate out of the same offices.

The driving force behind the start-up was Malcolm Gluck, then the controversial former Lintas creative director who was to go on to find fame as a wine writer and the author of Superplonk.

The agency already had a creditors' winding-up order before it called in a receiver. However, Gluck denied that the troubled shop was being folded merely to start again in another guise. "We will do all we can to meet our liability and settle any undisputed debts," he said.

After the failed venture Gluck made an attempt to launch an advertising magazine while helping Tim Priestley, the agency's managing director, to launch a new operation, the Advertising Partnership. Asked if what he was doing was morally right, Priestley replied: "Life has to go on."


Cowan Kemsley Taylor was a Saatchi & Saatchi breakaway, set up in 1990.

By 1992, it was in hot water. Technically bankrupt, it became involved in legal disputes with BT and Bhs over unpaid fees.

The agency offered creditors debt for equity deals to prevent it from closing. The creditors had little choice but to accept or face losing the money owed to them.

It held on to a handful of small-budget accounts, but its image, both internally and externally, was tarnished. In 1997, it merged with Butler Lutos Sutton Wilkinson and now trades as RPM3 with billings in the region of £30 million.