AMV has been picking up PR companies apace lately, but speculation that
this heralds a return to the heady buy-buy era of the 80s is misplaced.
Robert Dwek reports
The Abbott Mead Vickers group has been busy acquiring PR companies, most
recently Freud Communications, an entertainment PR specialist, and
Fishburn Hedges, a corporate PR outfit. These join Hammond
Communications, a consumer PR company, and Frew Macmaster, an investor
relations PR operation.
Ad agencies snapping up PR consultancies is something we all remember
from the 80s. But the recession was supposed to have put a stop to this
kind of thing. Does AMV’s expansionist behaviour herald a full-scale
return to the good old days?
Put this question to people in the PR and advertising communities and it
is greeted with an uncomprehending pause that implies: you must be a
very stupid person even to speculate on such a possibility. They will
then gently remind you that the 80s were the 80s, while the 90s will
never be anything but the 90s. Which appears to equal: older, wiser,
more sober, more cautious, etc.
Peter Mead, the chairman of AMV, goes along with this view
wholeheartedly and strongly rejects the idea that his company has been
on any kind of buying spree. ‘I’d hardly call it that, when you consider
that our last two purchases were separated by a period of two years.’
This seems to be a slight exaggeration, since Freud was bought in
December 1994 and Fishburn Hedges in January of this year. However, both
companies say they were in talks long before the purchase was actually
agreed, which might explain Mead’s alternative timescale.
Mead adds: ‘Nobody who follows our company will believe we’ve been on a
buying spree. We’ve shown consistent, solid growth and our acquisition
policy is based on quality acts in different sectors of the
He takes issue with the label PR when applied to the four companies
mentioned, preferring to view them as very individual communications
specialists serving well-targeted niches. And although AMV does not buy
companies purely in the hope that they will provide cross-selling
opportunities, Mead points out that synergies and integration have
occurred quite naturally.
He also dismisses the (very 80s) idea that his group is still primarily
concerned with advertising and that these below-the-line acquisitions
are supporting acts. ‘Look at the campaign which Freud ran for the
launch of Pepsi Blue,’ he says. ‘They were the ones who took the lead,
who did all the event advertising and arranged for Concorde and the
Daily Mirror to go blue. AMV’s ad campaign was there to back up Freud’s
As far as Mead is concerned: ‘Anybody who compartmentalises
communications companies and says that one area can’t cross into another
is simply wrong.’
AMV continues to look for more acquisition opportunities (it has already
stated its intention to buy another, as yet unspecified, company). But
Mead, who prides himself on his vetting of potential purchases, adds:
‘The word ‘spree’ will never be a part of our vocabulary.’
But aren’t publicly listed ad agencies still in the dog-house as far as
acquisitions are concerned? Mead is convinced that this was not the
reason for the relative dearth of takeover activity in recent years. ‘It
wasn’t for lack of ambition or opportunities, or even because they were
being punished by the City,’ he asserts. ‘It’s simply that there has
been too much of a debt overhang - not for us, but for others - and as
this starts to work itself out of the system there will no doubt be more
acquisition activity. The way forward for a publicly quoted company will
always be a mix of organic growth and acquisitions.’
Others in the ad world agree. Paul Simons, chairman of Simons Palmer,
thinks the high price/earnings ratios of publicly quoted ad groups
(often in the 16 to 20 range) make it ‘relatively cheap’ for them to buy
companies at the moment, especially if the target is being valued on a
PE of around ten.
Simons believes an expansionist era is dawning: ‘The City has forgiven
ad agencies for the sins of the past, and there is now a strong feeling
that they should be looking for growth opportunities.’
But is owning a PR company necessarily the right way forward? After all,
Simons’ own agency has developed a close association with an independent
PR consultancy, MCM, but has so far resisted the urge to forge a
Moreover, many ad practitioners now argue that owning a below-the-line
outfit means little or nothing to a client and that selecting the right
agency for the job is their sole concern.
Jonathan Obermeister, communication development director at AMV, says
this misses the point. ‘We are not buying these companies because we
think they’ll lead to a one-stop-shop experience. We’re buying them
because we believe they are very strong businesses in their own right.
That said, they are integrating very well into the AMV group.’
Certainly, AMV’s PR acquisitions appear happy with their decision to
sell. ‘It looked a bit strange at first sight,’ Matthew Freud, chairman
of Freud Communications, says. ‘There wasn’t an obvious match between
what we were doing and what AMV did. But what linked us was a set of
principles and our commitment to building the companies. I saw AMV as a
kind of big brother figure.’
But he warns other ad agencies thinking of snapping up a PR consultancy
to approach with extreme caution: ‘The PR industry is split into a few
very big companies and a great many tiny outfits with volatile earnings
and client lists.’
Neil Hedges, chief executive of Fishburn Hedges, and formerly chief
executive of boom-to-bust PR company, Valin Pollen, spent two years
getting to know AMV before a deal was signed.
He stresses: ‘We shared a lot of common values with AMV. It wanted to
buy us for what we were, not for the cross-selling opportunities. It’s
been very relaxed about this side of things and has let things happen of
their own accord.’
Tim Bell, chairman of the Lowe Bell PR group, notes that PR companies
are structurally very different from ad agencies: ‘They can’t be run if
they get too big and don’t maintain separate profit centres. This is
inconsistent with the ad agency mentality which is all about building
things bigger and bigger.’
He also warns that the big risk in buying a PR specialist is that ‘the
top talent will clear off’. This, he says, explains AMV’s careful and
Peter Gummer, chairman of the UK’s largest PR outfit, Shandwick, agrees.
‘I don’t think there could ever be an aggressive takeover of a PR firm.
Some kind of conversation would be needed, there would have to be
He sees no clear trend emerging. ‘AMV is building a multi-service
communications group. For Shandwick, being independent works very well.
I think there will be more polarisation between multi-service groups and
very focused, specialist groups.’
All of which sounds very sober and sensible. It seems that the 90s, no
matter how much deal-making takes place, no matter how much profit
boosting goes on, will be remembered as the longest corporate hangover
in history - for the marketing services sector, at least.