LIVE ISSUE/STARVEST: How irreparable differences destroyed the MediaVest and Leo Burnett alliance - This merger is off but both parties realise they need to grow, Claire Beale says

At the start of November, MediaVest London’s chief executive, Jim Marshall, spent two days ensconced in an office at Leo Burnett’s Sloane Avenue headquarters. Having convinced Burnetts’ media chiefs that a merger of the two operations could really work, it was time to reassure the troops.

At the start of November, MediaVest London’s chief executive, Jim

Marshall, spent two days ensconced in an office at Leo Burnett’s Sloane

Avenue headquarters. Having convinced Burnetts’ media chiefs that a

merger of the two operations could really work, it was time to reassure

the troops.

The meetings were the culmination of months of painful negotiations

between the two companies. By mid-November, both parties were agreed:

combining MediaVest with Burnetts’ media department would create a

pounds 485 million powerbase in the UK media market, offering clients a

better-resourced media service and providing a strong platform for the

expansion of a new international media network, StarVest.

StarVest was to launch in the UK on 1 February 1999 and would, at a

stroke, snaffle the number two slot in the media league table from Carat

and nip at the heels of the market-leading Zenith.

But by the start of last week, ripples of discord were starting to

spread from across the pond. Finance chiefs putting the finishing

touches to corporate structures hit walls, emergency calls from New York

and Chicago urged talks to be put on hold and by Tuesday evening the

word from the US was official: the merger was off.

A joint statement from Burnetts’ chairman, Rick Fizdale, and Roy

Bostock, the chairman of MediaVest’s parent, MacManus, laid the blame on

irreparable differences of opinion. With typical American courtesy, the

two chiefs told their employees, rivals, clients and the world: ’While

we have a great deal of respect for one another, we had enough

fundamental differences of opinion on how to run such a massive

operation that we’ve both chosen not to move forward.’

US insiders suggest arguments raged over who would run the merged

network and how it would operate. Irwin Gottlieb, the outspoken

president of MacManus’s US TV buying operation, TeleVest, was touted as

the chief of the new company, though this would not have been a

universally popular appointment.

Problems arose over quite how independent departments such as TV buying

or sponsorship would be from the core of the new agency.

The statement continues: ’MacManus and Leo Burnett each have the talent,

systems, resources and scale to give clients a real competitive

advantage in media.’

In truth, both agencies’ media products are powerful and well regarded

in the US. But on a wider stage, Burnetts’ media might is patchy, while

MediaVest is limping along with a few key offices and a poor network

proposition. Unfortunately, it is those Burnetts and MediaVest offices

outside the US that perhaps recognise the urgent need for a strong

international network more than those still sitting pretty in the


In the UK, the collapse of the deal leaves MediaVest winded. Not only

has precious time been wasted and business lost but competitive edges

are also gradually being worn away as rivals increasingly boast strong

international networks and clients align more and more media business on

international lines. Marshall suggests that simply growing organically

may not be enough in some markets and deals - whether local or

international - will have to be looked at in the future.

Bostock takes issue with suggestions that the agency’s media strategy is

now left floundering. ’Burnetts came to us, we didn’t seek them out,’ he

explains. ’A merger is not necessary in order for us to form a very

large media operation. We’re incredibly strong in the US. We’re

disappointed this deal didn’t come off, but we went in with our eyes

open and now we will simply carry on where we left off. We will be up

there among the handful of large global media players.’

Bostock says that before the Burnetts talks, his agency had already

formed a MacManus Media Task Force which had made significant progress

in identifying how best to form a full-service global media company. An

internal memo promises that these plans will now be reactivated and

Bostock has set a new date - 1 January 1999 - for the launch of the

network, which will be headed by Gottlieb. Whether the TeleVest brand

will co-exist alongside a MediaVest US media operation has yet, he

admits, to be decided.

Yet Bostock acknowledges that there is still room for a deal with

another media network. ’This hasn’t put us off,’ he says. ’But we’re not

far enough along the road to say who would be a potential partner.’

Grey’s MediaCom and Carat are the likely options.

Burnetts won’t be rushed into an alliance. Jeff Fergus, Burnetts’

European group president, says the agency is having a good media run on

both sides of the Atlantic; wins include Diageo and Sara Lee in the US

and pounds 170 million of P&G business in the UK. But he admits the

sands are shifting. ’We are aware our competitors are merging and

getting stronger,’ he says.

The agency will now undoubtedly look at expanding its StarCom media

brand into new territories. In the UK, Burnetts’ media department,

jointly headed by David Connolly, seems ready for change and if it’s not

to be a merger, the launch of a standalone media operation under the

StarCom name has not been ruled out.

Whatever strategies the agencies pursue, it’s unlikely that either could

make it to the top alone.

Perspective, p15.


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