Last week’s news that the London, New York and Frankfurt offices of
Ludgate Communications were being merged into the US sister agency
Golin/Harris International has been seen as the death of a once proud PR
The Ludgate name, which first appeared in 1991, will only live on as an
appendage to the London office - Golin/Harris Ludgate. Yet just a few
years ago Ludgate was a top 15 UK agency and a force to be reckoned with
in its own right. What happened?
Those privy to the Ludgate story say that this conclusion was almost
inevitable when it was sold to advertising and marketing services group
McCann-Erickson in 1997. At the time McCann, itself part of the
Interpublic group of companies, was seeking to build up its PR interests
and put Ludgate under the stewardship of New York-based Weber PR
Worldwide, headed by chairman Larry Weber.
The deal itself was not the problem; rather it was the terms of the deal
that contributed to the rot. McCann’s failure to insist upon substantial
earn-out clauses for key directors left the way open for them to take
the money and run. Acquisitions of this nature often see the inclusion
of earn-outs locking in key personnel for up to three years. In this
case, minor shareholders were free to take the cash on the day it was
signed and the major shareholders, led by Tim Trotter, only had short
The founding shareholders’ gain has proved to be the agency’s loss - the
last three years have been a tale of senior departures: Gay Collins,
Shona Prendergast, Andrew Nicolls and Louise Hatch left in early 1998 to
set up their own agency, Penrose Financial. The list of other senior
departures over the last couple of years makes for sorry reading, and
includes Tim Trotter, Andrew Sharkey, Tony Friend and Nick Boakes.
Within 18 months of the deal all the founding shareholders had left.
Nor has the departure rate slowed. The last few months have seen David
Simpson and Terry Garrett jump ship to Square Mile. And now four senior
staff from Ludgate’s public affairs division have also just announced
their resignations following their failed attempt at an MBO.
Stephen Lock, formerly managing director of the public affairs division,
says that he and his colleagues approached Interpublic about buying the
business. They wanted to run their own company and didn’t feel it was
necessary to be part of the global group.
The public affairs division has been one of Ludgate’s more successful
business groups in the last couple of years and is now being run on a
temporary basis by Peter Sanguinetti, formerly director of corporate
affairs at British Gas. Sanguinetti’s experience should prove
invaluable, but without the presence in particular of litigation PR
specialists Lock and deputy managing director Richard Elsen, it is hard
to see how the practice’s niche in this area, for example, can
Andrew Sharkey, a founding partner at Ludgate and now a partner at
Luther Pendragon, believes Ludgate’s experience offers lessons to those
looking to acquire PR companies. ’They have to understand the different
motivations of senior and junior people within an organisation so that
you can motivate them all under a new structure.’
In Ludgate’s case the ongoing business was left without the key
personnel who had actually structured the deal. Some may speculate that
they had been working toward a sale and rapidly built the business up in
order to gain the best possible price, leading to questions as to
whether that level of growth was sustainable. If this was indeed the
case, with the deal done and money in pockets the main reason for
staying at Ludgate disappeared.
The effect of relatively short lock-in periods was also compounded by
the financial structure of the sale. Granville, a venture capitalist
company which sold its 27.6 per cent holding in Ludgate to McCann, had
insisted on a higher price to satisfy its own internal rate of
McCann only agreed to this by instituting a clawback from the Ludgate
business over the next four years in the form of an additional
This further decreased the chances of growing the business, making
directors more edgy.
Several sources also suggest that a lack of commitment to Ludgate from
Weber PR did not help. ’We were put into bed with Weber and that has not
been a successful relationship,’ says one insider.
So why should Golin/Harris succeed where Weber failed? Robin Hepburn,
Ludgate’s CEO, admits that there have been difficulties over staff
retention and recruitment in the last couple of years but says that is
an issue for all people businesses. He points out that many of the
departing staff have left for smaller companies so they need to
emphasise the positive issues relating to working for a larger business,
such as ease of movement between offices.
He also stresses that talk of the death of the Ludgate brand is a little
premature - although he does acknowledge that the Ludgate name is likely
to be dropped within two years. ’Golin/Harris is wholly supportive of
this business. Those who are predicting its collapse will be
This is a positive message and it provides us with all sorts of
The success of the Golin/Harris link up should be helped by a number of
factors. Reporting to Mary Bartholomew, managing director of
Golin/Harris in Europe rather than the US, should help, particularly as
both Hepburn and Bartholomew have worked together in the past at
Shandwick. As Hepburn acknowledges, that sort of link is key to a deal’s
This, after all, is a people business.