Dead deal market batters City

As Lansons Communications becomes the latest City shop to make redundancies, agency bosses have warned the collapse in M&A will cause further trauma for the financial PR industry.

As revealed on prweek.com this week, Lansons is in redundancy consultation with five employees and envisages cutting its staff of 104 to 99.

It joins Pelham PR, Tulchan Communications, FD and Brunswick in making cuts in City PR over recent months.

Tony Langham, chief executive of Lansons, said a slowdown in the financial services sector had resulted in a drop in client spend and the agency had to cut its cloth accordingly. 'We are still profitable, but we are over capacity for current market conditions,' he said.

Industry sources insisted there was still new business to be won, although most conceded pitching opportunities had thinned out since the turn of the year. However, in most cases this new business is simply not as lucrative as for most of 2008.

'I just cannot see how anyone in the M&A business will not be cutting costs,' said Andrew Grant, founder of Tulchan, which is in the process of making a 'mid-single figure' number of redundancies.

He said that in Tulchan's case, M&A work and other transactions accounted for between a third and a half of revenues and that the fall-off in M&A had been 'tremendous'. Tulchan has won a brief to work for entrepreneur Steve Morgan, as he attempts to win back control of housing giant Redraw, but such mandates have been rare.

Langham noted: 'If you are reliant on stock market flotations or M&A, it is going to be tough surviving the year.'

The spate of rights issues has bought some relief to the financial PR market. Maitland has found itself supporting the high-profile refinancing of HSBC, Premier Foods and Segro. Brunswick, which topped the 2008 Mergermarket M&A table with deals worth $406bn, is working on a rights issue for Wolseley.

But while some agencies claim to offset the lack of deal-related projects with restructuring and recapitalisation work, Grant argued that with few exceptions 'you do not make a lot of money from refinancing'.

He also noted more financial PR firms were likely to cut back in the weeks before the end of the financial year: 'You do not want to go into next year with your retainers and costs too far out of line.'

HOW I SEE IT - Fergus Wylie, Head of financial comms, Kreab Gavin Anderson

Those with a business model based on a single market, AIM IPOs or UK M&A for example, are more prone to the market cycle. The agencies likely to prove more resilient are those that are multi-product and multi-geographic.

There is recapitalisation work around, but it does not replace the income generated by the M&A cycle. Involvement in these rights issues is often limited to existing clients and PR work is far less than for an M&A deal process. Some single-product firms held their breath for Q1, but now realise that the UK outlook is not improving so are likely to take actions to reduce costs.