Close-Up: Profile - Why Havas has an appetite for Cake

The brand entertainment shop has ambitious plans, starting with New York.

Miami, three years ago. Three Brits meet to discuss the future. They're not scoping out cocaine smuggling routes or organising human traffic across the Mexican border, but discussing the future direction of a small UK marketing agency.

The three men are Mike Mathieson, Mark Whelan and Adrian Pettett, the directors of Cake. Included in the plotting and planning was the eventual sale of the business, a goal that was realised last week when Havas paid an estimated £12 million for Cake and unveiled its strategy to support the agency with an expansion programme over the next five years.

Their meeting in Miami was a form of break during a work trip to New York, a city they're likely to be visiting frequently over the coming months as they hatch plans to break into the US market.

Contrary to popular belief, Cake's sale to Havas wasn't a rush deal designed to beat the 80 per cent hike in capital gains tax that came into force just days after Havas completed the acquisition on the evening of 3 April (though the timing was an undoubted bonus).

Havas and Cake had been talking for almost a year. These talks arose due to some clear links between the two companies. Mark Craze, now the managing partner of MPG, worked as a non-executive director for Cake during a year out between Aegis Media and MPG, and remained a minority shareholder and fan of the agency, which he introduced to Havas' global investment officer, Juan Bascones. David Jones, the chief executive of Euro RSCG Worldwide, was also friendly with Cake's management team and encouraged talks to take place.

So what did Havas see in Cake? Bascones says: "In this service industry, you buy people, not so much assets, and the Cake management team has a good mix of commitment, spirit and motivation. They also take the long-term view and have a clear strategy."

Cake's management team is on board for at least five years and has ambitious plans to expand the brand into new markets. Cake New York is likely to launch early next year and the agency is also looking at a launch in Australia and, perhaps less immediately, in China. For Cake's part, in addition to the cash incentive, it had grown as far as it could as an independent.

It had swelled to 61 people at its London office, but was finding increasing demand from clients for an international element to its servicing. Mathieson says of the deal: "It was an important part of the selection process that it wasn't all about money. We really liked Havas and it is a big partner that can offer fantastic support."

Havas' strategy is to put Cake at the heart of its Havas Entertainment network of eight other brand entertainment agencies in various markets. Cake is also likely to plug into Havas companies including Euro RSCG (and its KLP division) and MPG. As Bascones puts it: "Havas is extremely strong in the French and Latin markets but weak in the brand entertainment area in Anglo-Saxon markets. We can now cover the UK and expand into those weaker markets."

What does he see as its strengths, and why will the agency sit in Havas Media, rather than, say, Havas' Biss Lancaster PR operation?

"Cake is about programming, creating events. In all of this PR plays an important role in selling this and supporting the media. It's great that Cake does PR, but it's not the reason we bought the business," Bascones explains.

Of course, Cake is not the only player in the brand entertainment sector, but it is one of the most established, and those who know the company say its real strength lies in its blue-chip clients list (Vodafone, Motorola and Nintendo are among its biggest). It has built a reputation of putting "edgy PR" together with advertiser-funded programming and live events to create a whole experience. As one source close to the agency puts it: "With some agencies, they're in a Catch-22 situation when it comes to AFP - they haven't done anything yet, so it's hard for clients to buy into. With Cake they can show you 20 projects for clients including Vodafone and Nintendo."

Observers rate the management team for being a rare breed that is able to combine creative ideas with delivering commercial results. They also say the team has a good blend of skills.

Whelan, the creative director, is the most flamboyant of the team, and comes from an ad background at agencies including DFGW. Mathieson, the chief executive, has a past in music PR, having worked at Virgin Records, and Pettett is a former journalist and publisher at IPC Media, where he worked on titles including Loaded. Fans of the agency suggest the deal will work for Havas Media because of the cultural fit it has with the core Cake team. "The thing about the Spanish is that if they don't like you, they won't do a deal with you," one Havas source argues.

Cake was launched in 1999 by Mathieson, Whelan and the third partner Ben Jones (who subsequently left to become a commercials director at Partizan). Pettett came on board in 2002 and, with his mix of music business knowledge and editorial background, helped to spearhead its move into advertiser-funded programming.

It's something Whelan has been doing for years, since he worked on a project for Nike in 1998 called "Nike breakout", an extreme running event that was filmed by Chrysalis TV. "So I knew there was a model there that was communications without advertising," he says.

Cake launched with the intention of handling more of this type of activity, but needed to offer PR services to bring in revenue while AFP projects got off the ground. The founders painted a phrase ("brand entertainment, entertaining brands") in huge letters on the office wall, but Whelan says: "There was no such business and no clients' budgets for it. So we took a commercial decision to keep up a PR offering to bring in revenue while we developed the brand entertainment side."

Its first big success was handling PR for the launch of Nintendo Pokemon, and it rapidly gained a reputation for providing media relations for entertainment brands. Its big breakthrough in AFP came with the creation of Orange Playlist, a show in the style of Desert Island Discs featuring celebrities airing their top music tracks.

It has run for three series on ITV1 and provides a platform for Orange to promote its music download services.

Whelan says his highlights since Orange Playlist also include the agency's audacious turfing of Trafalgar Square on behalf of Visit London. But his favourite activity was for Motorola, which involved a live event (the Scissor Sisters at the height of their fame playing a free gig in Trafalgar Square), online and print PR, and then TV programming (Channel 4 broadcast the gig an hour after it finished). Whelan describes this as a "total multimedia experience".

He adds that this is the sort of experience that Cake can now take to other markets, and that he is proud of the culture the agency has developed and is serious about maintaining this despite the Havas deal: "Havas Media's ambition is in line with ours - it wants to make a mark in markets such as the States through creativity and innovation."

So, with the deal completed and expansion plans in place, another trip to Miami seems inevitable.