There is nothing new about international media services groups
buying strong local agencies, and in this respect there is nothing out
of the ordinary about Financial Dynamics’ acquisition by Lighthouse
Holdings last week.
What made the deal unusual was the buyer’s brief history. Lighthouse
Holdings is not one of the usual suspect global players - an Omnicom,
Interpublic or WPP. Rather, it is a ten-month-old media services
conglomerate which has been involved in a recent blitz of strategic
Lighthouse was created with the financial backing of US private equity
funds Frontenac Company and GTCR Golder Raunser. It is reported to have
over pounds 60 million in equity, as well as additional resources
available to invest in a marketing services platform.
FD is Lighthouse’s biggest buy, and its first PR acquisition. Earlier
this year, it paid pounds 26 million for UK design agency Fitch, and in
the US it has bought branding consultancy Primo Angeli, sports marketing
consultancy Fantastic Sports and integrated marketing agency
But whereas the major international media networks have their origins in
long-established advertising agencies, Lighthouse didn’t even exist a
McCann-Erickson set up the Interpublic Group in 1961 to realise
president Marion Harper’s vision of an advertising holding company with
subsidiaries which would operate separately. As industry consolidation
picked up in 1996, Interpublic bought PR companies such as hi-tech
agency Weber Group, and last year bought International Public
’To offer full service communications, you have to get into PR,’ says
Gene Beard, vice-chairman of Interpublic.
So what do Lighthouse and FD want from the deal? Money, for one
This is not the first time FD has changed owners. After selling out to
Broad Street in 1987, eight FD directors were reported to stand to make
pounds 3 million between them by the time their earn-outs came to an
And having bought FD back for pounds 8 million in 1998, the directors
have cashed in again by selling to Lighthouse and will no doubt profit
handsomely from new earn-out deals, understood to cover a five-year
The agreed price of pounds 40 million for FD far outreaches the money
paid for financial PR agencies in recent years. Incepta paid nearly half
that (pounds 23 million) for Dewe Rogerson and McCann-Erickson spent
pounds 14 million on Ludgate.
But, says FD chief executive Nick Miles, personal gain is not the only
issue. The deal gives the firm the funds it needs to expand its range of
’We found bigger clients wanting services beyond investor communications
such as lobbying, crisis management and brand management,’ he says. ’If
we can do these in-house, there will be better confidentiality and the
service will be quicker. The deal also opens up the possibility of
cross-selling with Fitch.’
UK design agency Fitch has clients including BT, De La Rue, TagMcLaren
Audio, and WH Smith, all of which FD might like to get its hands on.
Indeed, persuading clients to buy a range of services, such as direct
marketing, PR and advertising, under one roof, is already an obsession
with the likes of WPP and Interpublic.
’But,’ says Lorna Tilbian, a media analyst at WestLB Panmure, ’there
isn’t too much synergy between sister agencies (at Lighthouse) at
Robin Hepburn, chief executive of Ludgate Communications, wonders where
FD fits into the Lighthouse portfolio. ’As part of McCann-Erickson,
Ludgate has the potential to be introduced to new clients and to work
with other PR agencies within the family,’ he says. ’The acquisitions
(Lighthouse) has made show a more general approach. It is difficult to
see how it can add value to FD.’
Some industry observers are sceptical about whether this is the dawning
of a major media services network or a roll-up operation which will
bundle agencies together which it will attempt to sell in the
’It takes a generation to build companies such as Interpublic, Omnicom
and WPP. There is no substitute for experience,’ says Tilbian.
Lighthouse chief executive Terry Graunke has already set up and sold a
number of marketing companies, including direct marketing and promotion
group US Communications, which Omnicom bought in 1991 for pounds 63
Furthermore, Lighthouse UK director Mark Scott spent four years involved
in mergers and acquisitions as operations director at WPP prior to
joining the company.
But, Scott says, it is not their intention to sell out, and adds that
the directors’ experience will help Lighthouse. ’We have people who
worked for WPP, Interpublic and Omnicom, and one of our principles is to
avoid their mistake of being too dependent on advertising,’ he says.
’Clients are better serviced by more targeted forms of
Graunke adds that the planned portfolio will not include advertising,
but branding and identity, PR, sport and event marketing, promotions,
direct and database marketing, and ethnic and healthcare marketing will
Ten months into its life, Lighthouse remains a largely unknown
Despite its acquisition of FD, the WPPs and Interpublics will play a
wait-and-see game before deciding whether it is credible competition.