Feelings ran high last week when i-level was put into administration and, with breathtaking speed, was liquidated. For some close to the events, as shock gave way to anger, this final chapter played out as a very modern morality tale.
As such, it featured a pantomime villain - the private equity company ECI - which critics claimed had pulled the plug with wholly irresponsible haste, thus casting 90 good people on to the streets.
The spin here was that, although cash was understandably tight at i-level, the business was still trading profitably, so there was no need for anyone to lose their nerve. Especially as, apparently, there was at least one potential buyer out there.
The lesson we can learn, a source close to i-level says, is that while private equity is good at some things, such as managing certain types of assets, it clearly doesn't understand "people businesses" such as advertising.
ECI doesn't see it that way. A statement underlined its "disappointment" at the outcome, which, it states, was unavoidable given a combination of dire factors, including "the impact of recession, the loss of a pivotal account owing to a change in COI tendering policy and the withdrawal of a vital working capital facility".
That the administrator did find a buyer, for a part of the company at least (Engine has acquired Jam, the social media division), will no doubt help to ease consciences at ECI, which was dismayed by its portrayal in some quarters as a cynical corporate vandal.
ECI maintains that it agonised over the future of i-level and faced no alternative once the bank decided to cut its credit. If i-level wasn't technically trading insolvently last week, it was almost certainly within hours of doing so. ECI had a legal responsibility to act.
ECI maintains that it will continue to look for the right investment opportunities in the media and advertising sectors - and doesn't feel its reputation or credibility have been damaged.
But the debate will rumble on - and it will centre, almost unavoidably, on whether COI was, as ECI suggests, such a defining factor in this affair. Because i-level sources point out that, although the COI account represented 40 per cent of billings when it was lost in February, the agency still had some plum briefs, not least with Orange, Specsavers and Next. Online buying is likely to default to the accounts' offline agency, Mediaedge:cia.
1. The agency opened its doors as an online media planning and buying specialist in 1998 but formally launched in April 1999. Its founders were Charlie Dobres, Andrew Walmsley and Craig Wilkie. I-level's debut grandstand account win came in November 2000, when it beat nine agencies to take charge of BT's £4 million online buying business.
2. Wilkie left soon after launch, while Dobres departed in 2007 to run an educational charity, leaving Walmsley as the remaining active founder. Walmsley had already been assessing strategic options following a number of unsolicited takeover offers from global marketing services groups - and had decided to pursue independent growth. To that end, he appointed David Pattison, formerly the business brain behind the success of Pattison Horswell Durden, as the chief executive of i-level's holding company (Faith Carthy was the group managing director). Pattison was tasked with building, primarily through acquisition, an international agency network for i-level - he had exited PHD having built its global network.
3. In May 2008, ECI Partners acquired a 60 per stake in i-level in a deal that valued the agency at £45 million. An injection of funds was expected to help finance expansion.
4. But as the "credit crunch" loomed, ECI applied the brakes, Pattison moved upstairs into a non-executive role and Stephen Rust, formerly the agency's chief financial officer and seen by ECI as a "safe pair of hands", was selected as Pattison's replacement in May 2009.
5. I-level had originally won a place on the COI roster in May 2003. During the consolidation pitch process, i-level had been in talks to partner Group M agencies - but the agency ultimately failed to reach an agreement and ended up pitching alongside Starcom MediaVest Group. The £250 million centralised account was then awarded to M4C in February, stripping £40 million in billings out of i-level.
WHAT IT MEANS FOR ...
- As always, advertisers will get exactly what they pay for. Yes, i-level made some strategic mistakes; and, yes, it was edged into fragile territory by unfortunate developments at both a macroand a micro-economic level.
- But the bottom line is that not enough advertisers were impressed by i-level's pitch - that only the most acute of specialist agencies can do justice to the rocket science that is online advertising.
MAINSTREAM, ESTABLISHED AGENCIES
- Established media networks have always argued that they tend, in the natural course of things, to inherit the earth - including any new bits that are opened up or developed by intrepid explorers such as i-level. After all, they argue, they have long-established relationships with major advertisers - ones that they'll always find ways to leverage.
- And if they lack expertise, they can always come along and buy it up as and when they need to. At a time like this, it's rather hard to gainsay that sort of philosophy.
- One observer was telling anyone who'd listen last week that this desperately unhappy episode should represent the end of the road as far as the ambitions of private equity in advertising and media are concerned.
- It's never as simple as that, of course. Beggars, if true beggars they be, can never hope to be choosers. It will be hard, however, while memories of this episode persist, for private equity companies to represent themselves as the good guys in this space.