LEO BURNETT
Leo Burnett has been edging towards a major deal ever since it opened
talks with Dentsu last December.
Discussions about Burnett’s sale of a sizeable minority stake to the
Japanese giant ran into difficulties this summer, but this week’s merger
with MacManus, and Dentsu’s 20 per cent ownership of the new holding
company, BDM, seems to have satisfied both parties.
Earlier this year, The Leo Group was formed as a holding company
comprising Leo Burnett worldwide advertising, Starcom Worldwide and
Bartle Bogle Hegarty, in which it has a 49 per cent stake.
The creation of the Leo Group also paved the way for 51-year-old
Londoner, Roger Haupt, the chief operating officer of Leo Burnett, to
succeed Rick Fizdale as the group chairman and chief executive on 1
January 2000.
Leo Burnett was founded in Chicago in 1935 with eight employees and
three clients - Hoover, Realsilk Hosiery and Minnesota Valley Canning.
It opened its first New York office in 1941 and, by 1947, billings had
reached dollars 10 million. Burnett first expanded out of the US in 1952
when it opened an office in Canada, primarily at Kellogg’s request.
Ten years later, Burnett opened a small office in London, but
international expansion was slow, mainly because of Leo Burnett’s desire
to review every piece of work coming out of the agency.
However, a global roll-out began in earnest in 1969 with the purchase of
the London Press Exchange International Network, which brought Burnett a
total of 32 offices in 23 countries.
Burnett now has 280 operating units in 81 countries worldwide and
employs more than 9,100 people.
Burnett created the Marlboro Man, but has also been responsible for
global brand icons from the Jolly Green Giant to the Pillsbury Dough Boy
and Tony the Tiger.
Leo Burnett has expanded its offering in the UK, headed by Jeff Fergus,
the group president of Europe, Middle East, Africa, and Asia Pacific,
over the past two years. It bought a 30 per cent stake in Hard Reality,
the interactive consultancy, and launched Starcom.
KEY CLIENTS
Delta Airlines
General Motors
H J Heinz
Kellogg
Kraft Foods
McDonald’s
Philip Morris
Pillsbury
Procter & Gamble
UDV
MACMANUS
By John Tylee
D’Arcy staffers across the world could hardly believe their eyes when
they opened their e-mails on Wednesday morning to find a message from
their boss, Roy Bostock.
’I want to share some very exciting news with you,’ Bostock told them,
before going on to announce the impending global alignment of the D’Arcy
and Leo Burnett networks under a single global holding company.
What gobsmacked Bostock’s people was that there should be a merger with
Burnetts rather than with the voraciously acquisitive Interpublic
Group.
Such was the discreet nature of the negotiations that even as late as
Tuesday evening, senior D’Arcy executives were predicting an imminent
deal with Interpublic.
Industry sources claim that parallel negotiations were taking place and
that talks with Interpublic had gone down to the wire before being
abandoned.
The fly in the ointment appears to have been Mars, one of D’Arcy’s most
powerful clients, and one which is almost paranoid about conflict.
Industry sources were this week blaming Interpublic’s failure to land
the MacManus Group on what one described as a ’very aggressive’ stance
by Mars against clashing Nestle business at Interpublic-owned
McCann-Erickson.
A merger with Burnett throws up no such conflict.
For MacManus, the merger climaxes a vital need for extra critical mass
to compete with the broad offerings of Omnicom, Interpublic and WPP.
The move - described as ’the biggest restructuring we have ever faced’
by the chairman of DMB&B, Arthur Selkowitz - was promoted as a
fundamental change in working methods to better serve multinational
clients.
The changes, which included switching David Jones from the London
chairmanship to European client services director, have not met with
wholesale approval.
KEY CLIENTS
Central Office of Information
Chanel
Fiat
Mars Confectionery
McCain Foods
Pedigree Masterfoods
Philips
Reckitt & Colman
Roche
Procter & Gamble
DENTSU.
By Jade Garrett
Dentsu’s grand plan to be a truly global player has been in place for
more than a decade, but translating the dominance it exerts at home in
Japan - where it holds around 40 per cent of the market - has proved
difficult.
In the early 70s Dentsu was the world’s largest advertising agency, but
as growth slowed through the early 80s, the agency was securing just 1
per cent of its revenue from foreign advertising.
Dentsu’s partnership with Young & Rubicam, which began in 1975, led to a
small joint venture in Tokyo in 1975 and has since thrived, with D/Y&R
becoming the third largest multinational agency in Asia, after
McCann-Erickson and J. Walter Thompson with billings that topped dollars
1.1 billion.
Elsewhere, the going has not been as good.
Dentsu’s dominance in its home market has been unchallenged, and the
management has remained confident that the strength of the brand name in
Japan could win and retain business overseas. Commentators have long
considered this attitude to be one of the major stumbling blocks to
growth outside Japan.
No non-Japanese has ever been a candidate for board membership.
HDM, a European partnership with Y&R, and the French agency, Eurocom -
struck in 1987 - briefly gave Dentsu a major European network, but the
alliance dissolved in 1990 when the French moved to build Euro RSCG
Worldwide.
Dentsu joined with CDP to retain its interest in Europe.
Dentsu, headed by its president, Yutaka Narita, made its first inroads
into the Leo Burnett camp at the end of last year when it acquired a 20
per cent stake in the network. It now becomes the largest shareholder in
BDM with a stake that is expected to be around 20 per cent. It plans a
listing on the Tokyo stock exchange in 2001.
KEY CLIENTS
Canon
East Japan Railway
Fuji Photo Film
Japan Airlines
Kirin Brewery
McDonald’s
Procter & Gamble
Siemens
Sony
Toyota
