APCO Worldwide: PRWeek Global Agency Business Report 2016

Challenging economic conditions in Europe prevent firm fromachieving larger growth after significant leadership change.

Margery Kraus, founder and executive chairman, APCO Worldwide
Margery Kraus, founder and executive chairman, APCO Worldwide

Principals: Margery Kraus, founder and executive chairman; Brad Staples, global CEO; James Acheson-Gray, MD, London
Ownership: Independent
Subsidiary: StrawberryFrog
Offices: Global 30; US 6; UK 1
Revenue: Global $119.9m; US $66.2 million; UK £5.5m
Headcount: Global 680; US 265; UK 57

U.S.

For the first time in APCO Worldwide’s history, founder Margery Kraus was not at the helm of the firm in 2015 after she was succeeded by London-based Brad Staples at the start of the year.

President and MD of operations Evan Kraus and vice chairman and president of global client strategy Neal Cohen, both U.S.-based, also stepped into new roles at the beginning of the year.

"A lot of these people had grown up at APCO, and therefore we could have a transition and still have a senior team that averaged 15 years’ experience with the company," Margery Kraus says, adding that the shift took place "in a seamless way."

Earlier in 2016, APCO and Teneo broke off talks about the latter taking an investment in the agency. The firm also held similar talks with BlueFocus. Kraus said at the time that the agencies were "only two of a number of firms" to which the company had spoken, but declined to identify the others. She also noted that APCO and minority investor The WindRiver Group had reached a mutual decision for the agency to look at other offers. WindRiver became the firm’s private equity partner after the agency’s management buyout from Grey Global in 2004.

In terms of financial performance, global revenue was up about 1.5% to $119.9 million, though U.S. revenue fell 4% to $66.2 million in 2015.

"We had a couple of accounts that shifted around in terms of where they were mostly housed or what kind of work needed to be done," says Kraus. "We operate with one bottom line for the world, so we don’t care where things are housed; the revenue follows the people and the people move around."

Sixty percent of the firm’s revenue growth was due to new business, with the number of clients serviced by the firm growing to 654 last year from 599 the year prior; 523 of those clients were on a retainer.

Significant wins
Last year, the firm won crisis work and general comms for Bechtel, as well as U.S.-focused work for Wyndham Hotels, Kellogg Company, and Ecolab.

It expanded its assignment for Welltower, an AOR relationship, to go beyond communications to include executive counsel and other duties.

The firm is also supporting the United Arab Emirates’ Etihad Airlines as it expands visibility in the U.S. APCO’s assignment for candymaker Mars expanded globally in 2015, as did its account for Johnson Controls. 

While the agency did not disclose account losses, work on the BlackBerry account, won in tandem with Text100 in April 2013, came to a close last year.

The firm closed its office in San Francisco, as well as its two-person footprint in Boston, deciding to prioritize other locations. APCO shut down Ho Chi Minh City after concluding it did not need two offices — the other in Hanoi — in Vietnam.

The Middle East, Asia-Pacific, and the U.K. were the regions that grew most quickly last year, while Continental Europe was less robust, due to factors including staffers moving to other regions and the political and economic environment.

The U.S., U.K., and Asia-Pacific were the top three performing regions. Broken down by office, Washington, DC, had the highest revenue, while Abu Dhabi was the fastest-growing.

In terms of sector, the top three services used by clients were corporate communications and public affairs, crisis, and research, while travel and tourism, food, consumer products and retail, and healthcare showed the most growth in 2015.

The firm added 45 staffers around the globe in 2015, though its U.S. headcount remained about the same at 265. U.S. staff turnover was just under 22%.

Fresh faces
Top hires in 2015 included Lisa Osborne Ross, who worked at Ogilvy Public Relations for 14 years as MD of its DC outpost. APCO also brought on former White House senior adviser Gadi Dechter as public affairs practice lead last summer. In March 2016, the firm appointed Adam Welsh as MD of the Singapore office. Welsh returns to APCO following a stint in-house at Opower, where he was senior director of regulatory affairs for APAC.

The agency named Geoff Beattie, a former TV journalist and a veteran of Cohn & Wolfe, as an executive director in corporate affairs in August. John Stauffer also joined the agency as a senior director in DC. Seven of the 15 members of APCO’s C-suite are women.

In early 2016, the firm’s global technology leader, Scott Friedman, resigned to launch his own shop, The Lede Agency. Last year, New York senior director Julie Jack departed for an SVP position in MSLGroup’s corporate practice. APCO Insight president Bryan Dumont departed early in the year for Brunswick. Executive directors in DC and New York, Philippe Maze-Sencier and Kirk Stewart, respectively, left for new ventures, as did Washington, DC, MD Michael Tuffin.

Last year also saw the launch of APCO ER, the firm’s emergency response service, which complements its crisis communications specialty. It helps clients facing crises that require an immediate response. The firm also partnered with Text100 to develop ATDigitalHealth, a joint offering that works on technology-focused healthcare issues.

UK & EMEA

Looking back on 2015, APCO CEO Brad Staples regards it as a strong year for the agency, with a particular improvement in its London operation, although he says traditional markets in Europe have been more challenging.

The Brussels office has seen good growth after coming out of a period of recession. But it is Germany that appears to the jewel in the European crown.

"One of our highest performing businesses anywhere worldwide is our German business, both in terms of solid growth and consistent margins," he says, adding that France and Italy are similar performers.

Italy is frequently regarded as the sick man of Europe as far as its economy is concerned, so how has APCO made its business in that country show growth?

Staples says: "All our continental European businesses benefit from a high percentage of shared revenue from global clients. Domestically generated revenue in Italy is tough. No question."

The Israeli capital Tel Aviv has also become a power base for APCO, with the agency handling global work for clients out of the office, as well as local work.

"It’s one of our most networked businesses," he says. "We do a lot of work in China and India that relates back to the tech sector and to Tel Aviv."

The challenge in the Gulf area for APCO, says Staples, is managing growth in the region. It is one of company’s fastest-growing regions and it accounts for more than a third of its EMEA revenue.

Highlights for 2015 include fast-paced growth in the tech sector, especially in Germany, while in the UK APCO has developed its ‘Global Solutions’ capability – the work it does for governments, sovereign entities and ultra-high-net-worth individuals around the world, which was also an areas of "solid performance and consistent growth" in 2015.

One reason that tech is a strong performer is the nature of APCO’s "issues-driven" offer to clients.

"This is a tough market for ICT companies. You only have to think about the critical debates they are wrestling with, with their stakeholders: it can be anything from taxation to intellectual property, EU regulations or responding to activists. That has created a rich area of new business for us. Having people who really understand the intersection between business, media and civil society, on a country-by-country basis, is crucial."

Another area Staples describes as "robust" last year is the agency’s transatlantic healthcare work.

A challenge for APCO in 2015 has been to "refocus" its practices, including healthcare, which accounts for nearly 30 per cent of the business, and corporate sustainability, now renamed corporate, purpose and sustainability.

There is also new leadership in the energy and renewable practice.

"We’ve realigned, relaunched and refreshed our practices," explains Staples.

The most significant decrease in revenue was the loss of BlackBerry at the end of 2014 but Staples says the agency has replaced that revenue with client wins including Nespresso in Brussels and Innovate in the UK, while in the Gulf, it has won the Arab Strategy Forum and Crescent Enterprises.

He says: "Most of our Gulf work is driven by large-scale initiatives, often for government or corporate entities based there."

Staples believes the role of organisations such as the UN and EU in global governance is changing and that this trend is having a "profound effect" on its work with clients.

He says: "There is no single UN agency that has responsibility for migration... the EU seems to be managing it poorly and national governments have very different perspectives. Some of our clients want to understand the economic implications of mass migration and ask what our reading and insight is into that and how they should respond to it."

And while some of its clients just want to understand migration, others – including some of those high-net-worth clients – want to get involved and help solve the underlying causes. They need help with directing their campaigns. This vacuum that Staples describes in global governance provides new avenues for business.

For 2016, APCO’s ambition in the region is to create what it calls a ‘global account leadership initiative’ in which more of its worldwide accounts will be led by the senior team in Europe, rather than from the US, which has been the case up until recently.

At the end of 2014, APCO restructured to refocus on key markets and reduced the number of offices from 35 to 30. Following these changes, Staples says he does not see any changes to the map in Europe on the horizon.

Staples wants to look back on 2016 having achieved two things.

The first is for the team in Europe to be aligned with the new mission and purpose the company has decided upon earlier this year.

The second is to achieve a much greater share of the EMEA business to be shared across multiple offices.

"Our business thrives when our colleagues work in a more collaborative way," he concludes. "We need more collaboration, more shared business and more collective growth of the business."

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