News Analysis: How is FD faring a year after MBO?

Twelve months ago, Financial Dynamics CEO Charles Watson claimed the firm's management buy-out would create something unique to the benefit of clients. Tom Williams tracks the firm's achievements since then.

One year since its £26m exit from parent company Cordiant Communications, Financial Dynamics seems to be in fine fettle. The firm's business as a whole is believed to be up 20 per cent for the first half of the year, while 2004 revenues are predicted to reach up to £35m.

While few now doubt that the MBO - masterminded by FD international chief executive Charles Watson, US president and chief executive Declan Kelly, non-executive chairman Tony Knox and then-chief financial officer Dana Mulvihill - was the right decision, this was not the first time FD had used the MBO.

In 2000, FD's then-chief executive Nick Miles led a successful MBO from GGT. The question being most asked by the market about FD's current structure is whether such a profitable trick has been repeated.

Retaining stability

A year ago, the focus, according to Watson, was very much on high staff retention in order to drive the business.

'Clients like to know that teams are stable, and hate high staff turnover. We will have commitment of 100 per cent plus from people who are putting their own money into the business,' Watson said at the time (PRWeek, 17 July 2003).

That focus is clearly something that remains at the firm's core and it is still very much a PR shop that can attract the heavy hitters. In the US, where the business is thought to have expanded by 40 per cent since the MBO, FD has hired 29 people since January. Among these were a public affairs double-whammy with the hire of Hill & Knowlton Washington DC head Neil Dhillon in May, followed swiftly by the appointment of former Fleishman-Hillard SV-P of public affairs Stan Collender to run its new Washington DC office as managing director.

For Kelly, the decisive move to Washington can be attributed directly to the structure that the MBO has afforded FD. 'The fact that we own the business allows us to do things that we would not have been able to do under Cordiant ownership. The decision to open the Washington office, for example, would have taken a lot longer to execute,' he says.

In Europe, too, there is a drive to appoint heavyweights and expand the business into new locations. Last November, former PricewaterhouseCoopers director of European communications Jeremy Wyatt joined the firm as its first vice-chairman, and in April it launched an advisory board that boasted such names as Barclays chairman Sir Peter Middleton, UBS Investment Banking vice-chairman Oliver Pawle and former Invest UK chairman Andrew Fraser.

On the transactional side, the company pulled off a coup when it hired Bell Pottinger Financial managing director and 13-year veteran Jonathon Brill, someone with extensive experience, including working for Asda on its bid for Safeway.

The appeal of the post-MBO structure has not gone unnoticed by some rivals. Tulchan Communications founder Andrew Grant, who famously tried to buy the company during the MBO negotiations, says he has detected 'a renewed sense of vigour since the MBO' at FD.

There have, however, been some key departures from the company, with Mulvihill leaving in January for personal reasons and Steve Jacobs quitting the chief operating officer role to write a book.

But Watson insists that these exits presented an opportunity for FD to appoint Hawkpoint Partners finance director Sanjay Jawa to take on both vacant group roles. 'This was a critical hire for the group. Rolling both roles into one really has been the best way to proceed as taking on management and client work never really works,' Watson says.

The logic of this strategy draws partly on Watson's fierce resistance to the emergence of a figurehead at FD, based on his belief that 'FD is a brand and not an individual'.

Some observers say the absence of an individual with the razzmatazz profile of a figurehead, such as Brunswick founder Alan Parker or Grant, has handicapped FD in its bid for more clients. But it does appear to have made it easier for FD to absorb the departure shocks that PR firms are naturally heir to, and it can play well with clients.

Effective strategy

Aventis senior vice-president and head of corporate communications Carsten Tilger reflects this view regarding the work FD did for him around Sanofi-Synthelabo's initially hostile £30bn bid for the company.

'It was very important to us that it knew how to operate in a bid team network and could be a respected partner with the investment bankers and the CFO. It knew how to translate the attack strategies of the various law firms and bankers into comms activities,' says Tilger.

But FD has also proved to be more than the financial PR brand for which it is famous, having taken on consumer accounts for clients such as Jamaica Tourist Board and the Royal Automobile Association, all evidence, Watson says, of how the business is diversifying.

The expansion into other areas and the maintenance of the FD brand in its core financial sector are key to delivering the kind of return that backer Advent International will expect if the VC sells its 55 per cent stake, expected within the next five years.

FD is clearly running hard to keep up with these demands. As the competition and the likely sale of Advent's stake draw ever closer, it may have to run even harder.

FINANCIAL DYNAMICS SINCE THE MBO

- KEY CLIENTS WON

Gartmore (new brief, US only)

Bombardier (new brief)

De La Rue (from Brunswick)

Genworth IPO

Grant Thornton (new crisis management brief over the Parmalat affair)

Jamaica Tourist Board (from Biss Lancaster)

- KEY CLIENTS LOST

Alstom (to M Communications) Avis Europe (to Brunswick)

Orange (post-France Telecom buy-out to Holloway & Associates)

Pennon Group (to Finsbury, after client conflict)

Taylor Woodrow (to the Maitland Consultancy)

Vedanta (handled IPO but retained brief went to Finsbury)

- PEOPLE, 2003

Around 240 staff worldwide

Fifty staff with equity

- PEOPLE, 2004

Around 300 staff worldwide

Seventy staff with equity

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