- The planned merger of Leo Burnett's and MacManus' media interests under a new global media brand has collapsed at the eleventh hour amid a clash of personalities and disagreement over the structure of the new company.
A formal announcement confirming the merger was expected next week, but talks broke down late on Tuesday evening and both parties decided to call off negotiations.
For a merger to fail at such a late stage, after a number of joint media pitches around the world and the involvement of key clients in the plans for the new company, is being seen as acutely embarrassing for both parties.
An official statement issued this week blamed the deal's collapse on irreparable differences of opinion. According to Rick Fizdale, the chairman and chief executive of Leo Burnett, the problems centred on the structure of the merged operations in the US.
Fizdale said: "While we have a great deal of respect for the people at MacManus, we had enough fundamental differences of opinion on how best to run such a massive operation, especially in the USA, that we've both chosen not to move forward."
The idea had been to pool MacManus' MediaVest and TeleVest brands with Leo Burnett's media operations around the world to form a new global media company called StarVest. There had been a good natural fit between the two companies, which are both roster media agencies for Procter & Gamble internationally, and a merger would have helped lever greater international efficiencies and provided a stronger network for global clients such as P&G and McDonald's.
Whilst a merger would not have propelled the combined agency into the top three of global media operations, it would have made them more competitive on the international media stage; both are also increasingly marginalised as competitors such as WPP, Omnicom and Interpublic Group marshall their global media muscle.
The momentum for the merger had originally come from the US, where both agencies are headquartered, and the UK media companies were encouraged to take a lead in providing a blue print for the merged company.
MediaVest London and Leo Burnett's UK media department have been working closely together for the past few months, co-operating on the pitch for Procter & Gamble's £200 million media business, organising management line-ups and setting a 1 February date for the launch of the new UK agency. Both parties are said to be extremely disappointed that the merger has now been called off by their US parents.
A Leo Burnett's UK media independent under the StarCom brand -- the name used by its US media operation - is not being ruled out. Since winning £170 million of UK P&G business last month, the Burnetts media department is in a stronger position to launch as a stand alone operation.
The breakdown of talks leaves MacManus' media strategy in tatters. Since launching MediaVest as a media brand in 1997 the company has failed to develop a coherent European network and, because of the planned merger, the flagship UK operation has taken a hit in its drive for growth.
The UK agency has this week lost the £9 million KFC media business, which reviewed because it would have been a clash with Burnetts' McDonald's media account in a merged agency. MediaVest also lost out in the P&G pitch by stepping back and pitching jointly with Burnetts -- emerging with only the £2 million radio buying account. P&G, however, is said to be comfortable with the agencies' decision not to go ahead with a merger.
According to MediaVest's UK chief executive, Jim Marshall, a UK merger would have seen significant benefits for both agencies. "We knew we could make it work successfully in the UK and the fact that it is not happening is very disappointing. It's ironic that the deal fell down in the US, given that that's where it all started."