Even by current standards of the voracious acquisition frenzy in
global advertising, this week’s news of the sale of Fallon McElligott to
Publicis will surprise many.
Since opening its doors in 1981, Fallon has made a virtue of being
Opening in Minneapolis went against the grain of the Madison
Avenue-centred geography of the US advertising industry of the time.
Idiosyncratic and entrepreneurially driven, the agency has always
relished its individuality.
What’s more, it appeared to have learned a lesson from its previous
sell-off to Scali McCabe Sloves in 1986 and the subsequent buy-back when
Scali’s owner, Ogilvy & Mather, was in turn absorbed by WPP. Many
expected Fallon to continue ploughing a lone furrow in the middle market
while its peers succumbed to the big advertising groups.
But I beg to differ. The only surprise in Fallon’s decision to sell is
that it has taken so long. For years the agency has professed to hold
global ambitions, while being resoundingly outgunned by the superior
geographical and functional resources of the oligopoly of global
It was thus faced with a stark choice: either reign in those ambitions
or treat them seriously. With a demanding and determined figurehead like
Pat Fallon driving the agency forward - a man proud to admit, ’I’m one
of the world’s least gracious losers’, following the departure of his
prize dollars 95 million Miller Lite account to Ogilvy & Mather New York
last July - the chance of reigning in those global ambitions were less
From Publicis’ point of view, Fallon represents another toe-hold in the
crucial US market. After his crushing defeat by his former partner, True
North, in the battle to take over Bozell, chairman Maurice Levy has
snared a prize to add to his 1998 purchase of San Francisco’s Hal Riney
We can be sure that Fallon and his financial supremo, Irv Fish, will
have examined the Bartle Bogle Hegarty/Leo Burnett marriage and signed
an equally sound pre-nuptial agreement concerning managerial
independence and money.
Talking of money, speculation is the only route available to us in the
case of deals struck by privately owned groups like Fallon. So here
goes ... advertising groups are usually valued on a multiple of post-tax
profits, so let’s apply a conservative valuation of 1.5 times gross
income for the last year for which figures are available (1998 and
dollars 68.5 million according to Advertising Age). That gives a figure
of dollars 100 million, while an upbeat valuation of two times gross
income (factoring in Levy’s desperation factor) would give Fallon and co
closer to dollars 150 million.
Mischievous speculation aside, this deal enables Fallon to break out of
its position as a medium-sized US agency and build a network, while
Publicis can now pursue its US ambitions more seriously. For both sides
it makes eminent sense.