As waves of consolidation struck the PR industry over the last few years, there was at least one consolation at hand. An increasing number of big players may have been forced to huddle together for refuge against chill economic winds, but small agencies - fast-footed and unburdened with huge offices and dead wood on the payroll - were dodging the storm.
Now, however, even this crumb of comfort seems to be vanishing. Over the last three weeks, a series of niche players have decided to join forces.
For starters, August.One Communications opted to merge with NextFifteen Communications Group sister agency Joe Public Relations. Then there was Focus PR, which acquired niche interiors and design PR firm Silk Public Relations. Frank PR chairman Graham Goodkind revealed plans to merge with House PR and then said he had other targets in his sights. Kaizo bought Beer Davies, while consumer PR shop Le Fevre sold up shop to marketing company Media Square.
Does all this mean the smaller players - many of whom launched in and after the dotcom boom of the late 1990s - have run out of steam?
Joe Public MD Matthew Wood says his firm was finding it hard to see where organic growth was going to come to from in the face of shrinking client budgets. It wasn't that they were losing business to other agencies, he claims, but it was frustrating to see pitch wins offset by cash-strapped clients cutting their spend.
The only way to compete with larger agencies was to broaden the offering - gaining the corporate reputation capability previously beyond them, through the union with August.One. 'We could have carried on,' says Wood.
'But you have to look at your path and see where you're going to be in two or three years.'
According to Wood there's a trajectory followed by many of the successful start-ups launched four to five years ago. The agency starts off as a 'new kid on the block, who everybody has to talk to', but years on inevitably loses some of the early momentum. And while they may remain profitable, that isn't enough of itself. Growth means motivational benefits for staff and a boost to the agency brand - hence the need to merge to achieve critical mass.
Frank PR chairman Graham Goodkind believes we are likely to see more such mergers over the next year. He says there are many four or five-year-old agencies founded by PROs, who remain excellent practitioners but have never quite brought the same talent to running a business - making excellent buy-out targets. In the case of Frank's merger, Goodkind says he was largely eyeing a chance to recruit an established team of consultants he held in high regard.
An expensive recruitment strategy, surely? But Goodkind says that, with recruitment agencies charges these days being so high, the strategy is not as expensive as it would appear and solves many team-building problems at a stroke. And as PR is a people business, it is relatively easy to tempt clients to move with consultants, he says - just make sure you don't skimp on the due diligence.
Many recently married agencies describe their merger more in terms of the perfect match than as finding a shoulder to lean on in hard times - yet some are more adamant than others that the economic climate had little to do with their decision.
Focus PR MD Hilary Meacham says her agency's acquisition of Silk was following in a tradition of firms acquiring a boutique agency to broaden their offering in a key strategic area. In this case, Silk's expertise in design and interiors fitted nicely with a direction in which Focus, a fashion and life-style specialist, was already moving.
Rupert Ashe, a director at transactions specialist Madsen Gornall Ashe, says the fragmentation at the lower end of the market in recent years means there could be a sudden spate of mergers at any time.
That is especially true now that there are a lot of people who have seen their dream of building a large agency from scratch collapse as the market lurched. In many cases the cost base is beginning to hurt, says Ashe.
So why not find another agency to help bear those costs?
Merging or selling may often represent the end of a dream, but at least it offers a quick fix, and if the due diligence has been diligent enough, a relatively risk-free solution.
THE FIVE LATEST DEALS AND WHY
- Kaizo/Beer Davies 'hope to penetrate consumer area and boost creativity', Kaizo CEO Crispin Manners
- August One/Joe Public 'organic growth did not seem possible without a deal', Joe Public Relations managing director Matthew Wood
- Frank PR/House PR 'eyed a chance to recruit an established team of consultants', Frank PR chairman Graham Goodkind
- Focus PR/Silk PR 'acquiring a boutique agency to broaden the offering in a key area', Focus PR MD Hilary Meacham
- Equanim/Le Fevre 'We saw this as a chance to broaden services with the backing of large firm ', Le Fevre chairman Joy Le Fevre.