ANALYSIS: Global PR - European firms find PR gold across pond. The British are coming! The French are coming! Cordiant’s purchase of Lighthouse is the latest salvo in what has become a full-scale invasion of the US PR scene. Claire Atkinson finds

The Fourth of July fireworks were barely over when London-based marketing services outfit Cordiant Communications dropped a bombshell of its own, buying Lighthouse Global Network in a dollars 592 million deal.

The Fourth of July fireworks were barely over when London-based marketing services outfit Cordiant Communications dropped a bombshell of its own, buying Lighthouse Global Network in a dollars 592 million deal.

The Fourth of July fireworks were barely over when London-based

marketing services outfit Cordiant Communications dropped a bombshell of

its own, buying Lighthouse Global Network in a dollars 592 million

deal.



George Washington’s military may have sent the British packing in 1773,

but the Brits are back, swarming all over the PR business like never

before.



And the French are in hot pursuit as well. Since the beginning of the

year, barely a month has gone by without news of another major land grab

as European firms attempt to solidify overseas operations.



With the majority of global communication dollars spent in the US, it is

easy to see why heavyweights like WPP chairman Martin Sorrell and

Publicis top dog Maurice Levy are looking to drop a few more anchors

stateside.





Building an empire



Publicis has been stealthily building up its PR holdings. In April,

Publicis Consultants took dollars 7.3 million out of its wallet for

public affairs shop Winner & Associates. It also added a string of PR

agencies to boost its Publicis Dialog brand last year. Levy’s company

was for a time linked to a Young & Rubicam bid, but Y&R eventually sold

to WPP in a dollars 5 billion deal. Levy instead settled on Saatchi &

Saatchi, bagging the US office of Rowland Worldwide as part of the

deal.



Last month, Levy told PRWeek that he intends to double the size of the

firm’s marketing services arm and pursue further acquisitions. Andy

Hopson, president and COO of Publicis Dialog, explains why everyone

wants in on the US PR business: ’Marketing services is growing much more

rapidly than advertising, and the majority of all communications dollars

are spent in the US. You can’t be a global powerhouse without being a US

powerhouse.’ Hopson claims the future of Rowland’s US office is still to

be decided.



Art Stevens, CEO of Publicis Dialog/New York, adds, ’If you are not well

represented in one region, then you need to scramble.’



But Levy and Sorrell - who now counts the top two global PR agencies,

Burson-Marsteller and Hill & Knowlton, as part of his empire - are not

the only interlopers. In April, the little-known Incepta Group, run by

David Wright, paid a staggering dollars 150 million for IR specialist

Sard Verbinnen, and added Sard to its Citigate Dewe Rogerson

operation.



The race to gobble up American IR shops is not surprising, as it is

directly linked to an interest in cracking the lucrative US capital

markets. Since investor relations firms work closely with teams of

banks, lawyers and analysts, they can offer valuable advice and insight

about investment opportunities.



Indeed, Incepta chief executive David Wright told PRWeek back in May

that, ’We needed a strong presence with the US banks, because although

we were seen as the leading player in many world markets, without a

domestic players in the US we weren’t taken seriously.’



It is perhaps with this in mind that Cordiant CEO Michael Bungey jumped

at the chance to buy Lighthouse, which houses two IR specialists -

Morgen-Walke (M-W) and Financial Dynamics (FD). Though Cordiant already

owns a PR shop, Houston-based Bates Churchill PR, it is a late arrival

to the public relations party.



Speaking this week, Wright told PRWeek that the success of the

Cordiant-Lighthouse acquisition will rest on how the earn-out payments

are structured and how the two teams get along. It appears that the

corporate cultures at M-W and FD are as different as chalk and cheese.

One industry source says, ’The Morgen-Walke/Financial Dynamics (merger)

has been a bad transition. The two firms do not gel.’



While Lighthouse had hoped to build a bridge into the US through M-W, it

appears the firm does not have the expertise that London-based FD

requires, forcing FD to work with alternative IR agencies in the US.

Though the two firms have projects in common, they have no shared

clients. Bungey admits that M-W has nowhere near the same level of M&A

experience as FD.



He says he will remedy this by bringing M-W execs over to the UK to

experience the scene firsthand.



Citigate and Sard are also having difficulties figuring out how a merger

of their New York IR operations will affect Sard’s future profit

margins.



Wright says Citigate and Sard have spent the past two months working out

how best to blend their operations, and says the integration is going

’extremely well.’ Sard is working on some 20 projects with other units

of Incepta, though Wright declined to name any. Being acquired often

leads to executive shakeups and staff departures: M-W lost

principal/group director of IR Donna Stein (as well as Jennifer Gery) to

Brainerd Communications.





Slowdown across the pond



The Europeans’ interest in the US of late may also have something do

with a slowdown at home. According to PRWeek’s sister publication in the

UK, the top 150 agencies there grew only 14%, compared with 17% in 1998,

and operating profits were down 9% overall. Meanwhile, the US economy

continues to boom - PRWeek’s recent industry survey found that income

was up 28% in 1999, though acquisitions, rather than organic growth,

accounted for almost half that figure.



While everything is rosy for now, there are fears that the

Internet-fueled ad boom is over. Volatility in the Nasdaq market and

consolidation in the dot-com sphere could be a reason why so many

US-based agencies are keen to talk. After spurning suitors for two

years, Middleberg + Associates made the most of the hi-tech explosion

and sold to France’s Euro RSCG.



CEO Don Middleberg says the sale was made in order to woo international

clients, as the firm had previously lost pitches because of its US-only

status.





Plenty of firms still to buy



Will the acquisition binge abate in the months ahead? Incepta’s Wright

says there are still a number of high-quality independents that need to

be part of an international group. He mentions Edelman, but takes pains

to point out he’s never met with them: ’I think we’ve seen the peak in

terms of consolidation, but there are still good companies out there to

buy.’



Wright believes that the Euro-activity can only be good for the US PR

business. ’The quality of PR in Europe is no different from the quality

of PR in the US. But the US PR scene has not been terribly

international. That has made them attractive to us.’



And lest we forget, the transatlantic acquisition route goes both ways:

there is much speculation about how long Cordiant will remain in foreign

hands, as it has all but said it is fattening up for a sale. Candidates

include Interpublic, Havas and True North Communications, which houses

the Financial Relations Board. If Cordiant gets bought before the end of

the year, the staff at M-W will have been owned by three separate parent

companies in a year. Can that be good for long-term planning, much less

the sanity of its account staff?





THE EUROPEAN INVASION: RECENT DEALS



July 2000



London-based Cordiant Communications pays dollars 592 million for

Lighthouse Global Network, a Chicago-based holding company that owns

financial PR/IR shops Financial Dynamics and Morgen-Walke. Cordiant’s

only US PR holding to date had been Bates Churchill PR (Houston)





June 2000



Having failed in its bid for Y&R, Paris-based Publicis acquires Saatchi

& Saatchi in a dollars 1.9 billion deal. PR arm Publicis Dialog will

gain Saatchi’s US PR shop Rowland Worldwide as a corporate cousin.



Havas-owned Euro RSCG acquires New York-based hi-tech PR firm Middleberg

+ Associates, a dollars 22 million operation, for an undisclosed sum





May 2000



UK-based holding company WPP snaps up advertising giant Young & Rubicam

in a dollars 5 billion deal. Y&R’s Burson-Marsteller, Cohn & Wolfe and

Robinson, Lerer, Montgomery fall into British hands. WPP already owns

Burson rivals Ogilvy PR Worldwide and Hill & Knowlton.





April 2000



Publicis Consultants lays down dollars 7.3 million for public affairs

shop Winner & Associates.



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