Blue Rubicon and Open Road: the deal in more depth

Blue Rubicon's embrace of Open Road has elicited murmurs of congratulation across the industry, though it is less clear how it has gone down at Amazon, Asda and Vodafone.

Merger: (l-r) Blue Rubicon founder Fraser Hardie, Martin LeJeune, Gordon Tempest Hay, Nick DeLuca, Rebecca Reilly and Graham McMillan
Merger: (l-r) Blue Rubicon founder Fraser Hardie, Martin LeJeune, Gordon Tempest Hay, Nick DeLuca, Rebecca Reilly and Graham McMillan

All are Open Road clients that might be excused some concerns about the crossover with certain Blue Rubicon-represented rivals: eBay, Sainsbury’s and O2.

However, if they are sore, they are not showing it – Asda for example referred enquiries to the agencies while Sainsbury's director of corporate affairs Alex Cole said she was not concerned. The others were unavailable for comment.

Blue Rubicon CEO Gordon Tempest Hay insists both sets of clients are "absolutely 100 per cent positive" about the move, though he admits there are ongoing discussions about integration issues.

Many rival agencies privately acknowledge the neatness of the combination, which offers Blue Rubicon a pedigree in the political space where it was previously lacking.

Opinions differ as to how hard the agency has been trying in this area, however.

One could consult the quarterly register in which member agencies of the Association of Professional Political Consultants have to record their public affairs clients.

While Blue Rubicon has generally reported around nine clients over the space of the past two years (to Open Road’s 25), only two of the names have remained the same over the period: Heathrow and Facebook.

Tempest Hay clarifies that Heathrow’s main public affairs agency is Portland and Blue Rubicon often puts clients on the register out of caution over its corporate work butting up against the political realm.

But the past is the past. Blue Rubicon version 2014 is unquestionably able to satisfy the parts that its previous incarnation did not reach.

And if any client has first call on the expanded team it is Coca-Cola, for which Blue Rubicon does European corporate work and Open Road does UK public affairs. Another account they have in common is accountancy firm BDO.

Tempest Hay does not overplay the combination’s appeal to Coke, observing simply that "we already work together so it’s really a continuation of that relationship".

A potential obstacle to integration is the fact the two agencies will not initially be under one roof – the journey between Open Road’s Mayfair base and Blue Rubicon’s more casual London Bridge home takes around 20 minutes.

However, their respective staff, who have been set up in a buddy system to get to know each other, at least have a nice excuse for a jaunt along the Thames.

The delay is due to Open Road’s lease commitments rather than any client conflict strategy, according to one of its directors and co-founders, Martin LeJeune, who also values a bit of breathing space over hastening to co-habitate.

"There are so many mergers and acquisitions in our industry that go horribly wrong that it’s better to take your time and get it right," he cautions. "You have to manage coming together sensitively."

This sensitivity apparently extends to the financial incentives for Open Road’s management to stay on board. As PRWeek reported on Monday, there is no earn-out component to the transaction and the combination will have a single P&L.

"Both management teams really wanted to avoid an earn-out because they are destructive things," says Tempest Hay. "Anyone who deals with one of the big marketing services groups will tell you how destructive they are."

Pressed to explain how Blue Rubicon is avoiding the risk of Open Road’s senior staff leaving, he declines to spill the beans but coyly claims to have found "a much better way that means both management teams are committed to the business to see it through to the next phase".

To this LeJeune adds: "We’re in it [and] we’re going to stay in it."

How exactly Open Road slots into Blue Rubicon’s management structure is being worked out, though the agency’s three major shareholders – LeJeune, CEO Graham McMillan and chairman Nick DeLuca – and director Rebecca Reilly are joining Blue Rubicon’s management board.

What Tempest Hay does say about the financial side is that the deal is not value-destructive, that it will not lower Blue Rubicon’s operating profit margin. Its most recent accounts specify its operating profit as a percentage of gross profit was 23.4 per cent in 2012.

He is more forthcoming about the upside of expansion outside the UK, a process that Blue Rubicon started last year by opening offices in Qatar and Dubai, having secured private equity investment in 2012.

Although Open Road only has a London office, its experience in Brussels and Washington leads Tempest Hay to say it is inevitable that those two locations will be on its radar for additional outposts.

"This will be more than a London play," says Tempest Hay. "The strategy for Blue Rubicon over the next three to four years is to become the global leader in transforming the reputations of companies. If you’re going to do that you have to be able to advise with equal weight across the breadth of things that are on the CEO’s agenda – their standing with policymakers and regulators as well as the body public."

Such ambition lends credibility to LeJeune’s professed confidence about revealing the name of his agency’s new owner to his staff.

"We knew we could stand in front of the team last week and say ‘Blue Rubicon’ and they would say ‘wow’ not ‘why’."

AGENCY FACTFILE

Blue Rubicon

Founded: 1999
Client list at a glance: O2, Sainsbury’s, Centrica, Shell, Coca-Cola
Revenues: £17.8m (2012)
Pre-tax profit: £3.5m (2012)
Awards include: PRWeek Consultancy of the Year 2006, 2007, 2008 and 2012
Sub-brands: Surname & Surname (consumer), Thirty Six Strategy (applies political campaigning thought to business)

Open Road

Founded: 2007
Client list at a glance: Asda, Amazon, National Grid, AstraZeneca, Eurostar, Vodafone
Fee income: £2.2m (2012)
Pre-tax profit: undisclosed

This article was updated on 17 February to add a comment from Sainsbury's director of corporate affairs Alex Cole.

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