Analysis: Agency Mergers - FRB, BSMG: still happy couple after one year/BSMG’s dollars 33 million acquisition of The Financial Relations Board last January drew rave reviews, but are things still as rosy 12 months later? As John Frank discovers, t

Corporate mergers often follow the same path as some marriages.

Corporate mergers often follow the same path as some marriages.

Corporate mergers often follow the same path as some marriages.



Two partners who think they’re perfect for each other unite, only to

then try and change everything about one another.



The result, in the corporate world, can be acrimony and lack of the

all-elusive corporate ’synergy’ at best, or a complete breakup at worst.

Such an unhappy progression does not seem to be happening at the

Financial Relations Board, which last January agreed to a dollars 33

million takeover by BSMG Worldwide.



BSMG seems to have had the good business sense to leave a successful

operation operating as it had prior to the takeover. Rather than try to

change FRB’s business model, BSMG has worked to enhance it by

contributing technology expertise and capital needed to fuel FRB’s

ongoing expansion plans, says Ted Pincus, chairman of FRB/BSMG Worldwide

and a vice chairman at BSMG as well. In the year since the takeover, FRB

has:



- Reached its goal of achieving 1999 revenues of roughly dollars 36

million, compared to dollars 32.5 million in 1998 and dollars 26 million

in 1997. Looking forward, Pincus wants to hit dollars 100 million in

five years.



- Increased its client base, especially in the hot technology area.



- 120 of its 500 clients are now technology accounts.



- Started cross-selling its specialty IR services to existing BSMG PR

clients. Roughly dollars 1 million in cross-selling IR fees came in

shortly after the merger took place.



- Retained almost all of its partners after the merger.



When it comes to staff concerns regarding the merger, Pincus says, ’Our

people say to me, ’When is it going to happen, when is the other shoe

going to drop?’ Thus far, the honeymoon is still on.’



That’s the perception from the outside as well. ’FRB is largely

unchanged,’ says Nicholas Kalm, SVP with Edelman Public Relations in

Chicago. ’I think the FRB model is the FRB model and they continue to

follow it.’ Herb Corbin, president of rival KCSA Worldwide, agrees: ’I

always thought that FRB was a very fine competitive firm, and that

hasn’t changed because of the merger,’ he says.



Harris Diamond, president and chief exec at BSMG, says he doesn’t want

FRB to lose the entrepreneurial spirit that Pincus has brought to the

firm. ’It’s a big concern. You always worry about losing that in a

takeover,’ he notes. ’We try to foster a sense of entrepreneurial

independence in all (operations).’



FRB has also retained its own back-office functions. ’Not one person has

lost a position,’ he says. Not only that, but roughly 250 of FRB’s 300

employees were eligible to split dollars 2.9 million of the sale

proceeds that went, tax-free, into employee retirement accounts.





Everyone on board



FRB also upgraded its employee benefits package as a result of the

merger and now offers employees profit-sharing in the form of stock in

parent True North Communications, which has soared from dollars 27 per

share at the time of the merger to over dollars 43 at press time.



Others in Chicago PR continue to wonder if the merger will mean an

outflow of FRB employees. ’I’m not sure if they addressed the back-door

issue’ of employees leaving, Kalm says. But Pincus notes that virtually

all the firm’s 27 partners have been with him for more than 10 years.

Only one has left since the merger, drawn away by a competitor.



Pincus prides himself on retaining senior-level people, perhaps because,

over the years, his firm has had a reputation in the Chicago PR

community for churning staff. As the largest presence in the IR field,

it’s only natural other firms, and clients, will raid FRB for talent.

’We happen to be the fattest target around,’ Pincus contends.



Some of the most important upgrading BSMG has done for FRB has been in

technology, Pincus and Diamond agree. FRB spent long hours creating a

database of 55,000 investors that it uses to target IR messages. Diamond

admits that BSMG itself was a slow adopter of new technologies for PR,

but has been furiously spending to catch up and surpass competitors. He

estimates BSMG now spends dollars 2.5 million per year on technology

after spending dollars 4 million a few years ago to get up to speed.



FRB rarely kept capital like that on hand when it was independent,

Pincus explains. Indeed, Pincus went looking for a takeover partner to

get access to more capital to upgrade his computer systems and to seek

out international acquisitions. ’For that, we needed a big brother.’





The road ahead



Now comfortably ensconced in BSMG’s global family, Pincus has expansion

designs of his own. While he wouldn’t be specific about potential

candidates, he says Japan, England, France and Germany are his first

target markets.



IR is just taking off as a specialty in Europe, Diamond notes, and many

European companies are also looking for US IR representation as they

seek listings on American exchanges. Hi-tech firms are another likely

expansion area, as the firm’s technology clients now represent the

largest single concentration of FRB accounts.



Such activities will continue to involve the 66-year-old Pincus, often

called the ’Henry Ford of financial relations.’ Rather than take his

proceeds from the sale and leave, Pincus says he has a 10-year contract

to continue leading FRB while also handling his duties as BSMG vice

chair. ’I’m used to putting in 60 hour weeks,’ he says. ’I’m not really

psychologically constituted to ever retire.’



Pincus sees revenue growth in 2000 on a par with last year, with new

business coming from domestic and international sources. BSMG’s

worldwide offices give FRB a presence in countries they haven’t been

able to reach in the past. While the organizations remain separate, FRB

and BSMG staffers are getting to know each other as they refer business

back and forth.



Diamond also points out that the FRB takeover has given BSMG the

opportunity to go after a new client base of small- to medium-cap

companies, which FRB had mainly dealt with in the past. ’Most of our

expectations (in cross-selling) have been surpassed,’ Diamond says.



Pincus plans to continue emphasizing technological innovations, such as

a recent online CEO forum FRB held for a variety of its clients. The

forum provided direct investor access to company CEOs, something Pincus

says is a must in a stock market that includes a growing number of

online investors as well as money managers scattered throughout the

country.



So far, BSMG and FRB don’t seem to be trying to change each other,

something that, from a business and cultural standpoint, should prove to

be a good thing. If only all corporate mergers could be so painless.



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