ANALYSIS: US firms 'intelligence' offer opens up market - Incepta's acquisition last month of 'competitive intelligence' firm GIS is part of a growing trend, says Gidon Freeman

There's intelligence, and then there's intelligence. PR firms happy

to provide stats on market share or industry personalities are ten a

penny.



Those peddling Fleming or Smiley-style intelligence are thinner on the

ground.



Their ranks were, however, swelled last week with news that Incepta, the

FTSE 250 holding company for operations such as Citigate Dewe Rogerson,

Marchcom, Lloyd Northover and Albert Franks, had joined the fray.



Incepta became the latest to buy into the competitive intelligence (CI)

market with the acquisition of Global Intelligence and Security, an

outfit founded by eight former staff from security consultancy's market

leader Kroll Associates.



While the move by Incepta breaks new ground for UK PR companies, it sits

within a tradition of PR and marketing agencies attempting to diversify

revenue streams. And although it has so far proved a largely US-based

phenomenon, the global nature of the backer networks is allowing these

operations a London foothold as well.



Other groups to have entered this field include global Edelman

subsidiary PR21, a host of small regional agencies in the US and

Omnicom. The last of these seems the most keen, having both a subsidiary

in the market and an offering of its own.



Fleishman-Hillard, until last year the world's largest PR firm, has a

strategic alliance with the 75-strong Boston-based Leonard Fuld and

Co.



F-H insiders play down the 'dark arts' aspect of the tasks this

affiliate performs, but accepts that they might, say, investigate the

executives of a client's rival: 'We prefer to call this research than

investigation because we are just getting data to help clients make

decisions about communications,' insists F-H European president Jack

Modzelewski.



In addition to the F-H experience, Omnicom late last year invested in a

more avowedly security-conscious outfit led by outgoing New York police

chief Howard Safir. Omnicom linked this launch to the events of 11

September and suggested clients had become increasingly aware of the

ability of security issues to damage corporate reputations since the war

on terror began. Safir's key partner is also ex-Kroll and a former IBM

security director, Joseph Rosetti.



One reason for the spate of comms firms muscling in on this terrain are

the higher fees that can be charged. According to one source with a

close-quarters view of this sector's finances, while banks and law firms

need not fear for their fees supremacy just yet, the rates charged by

the new breed of CI consultants compare favourably with the high-end of

the PR world: they outcharge lobbyists and financial PROs alike.



This may account for the mouth-watering terms of the Incepta deal.

Although the company is paying GIS just £2m as an initial

consideration - itself a healthy downpayment for a firm with barely two

dozen staff - the earnout provides for a final maximum of over £30m.



And yet even this is a small part of the global CI sector - estimated to

be worth more than £1.3bn annually. Average-sized Fortune 500

companies spend in the region of £500,000 on external CI each

year.



But questions remain as to what this service - or set of services, since

CI is a diverse bag - contributes to the marketing mix. For Incepta CEO

Richard Nicholls, the case is clear: 'In an M&A, it is vital to size up

a company and make sure they are what they say they are. This is about

knowing where to look for that killer fact.'



Yet ethical questions remain. At a time when PR is trying to clean up

its act, branching into the potentially murky world of CI may not be the

best way of doing it. Indeed, there are pitfalls ahead for those at

companies with institutional shareholders to satisfy.



The extent to which this work can shade into the unacceptable was

illustrated last year when Procter & Gamble and Unilever fell out over

the former's exuberant use of CI in a spat over haircare products. Waste

bins were sifted through - as they were in a similar duel between Oracle

and Microsoft - litigation followed and the cause of fair play to which

PR seeks to contribute was not best served.



Needless to say, those in the PR world go out of their way to stress the

valid nature of the work they will take on. The suggestion that

integrating CI with PR means digging the dirt on the opposition and

leaking it to journalists is hotly denied. There is, say CI's defenders,

a difference between (on the one hand) searching securities filings and

pumping rivals' staff for information and, (on the other) the sort of

shifty behaviour one would immediately identify as corporate

espionage.



For companies such as Incepta, Omnicom, WPP and Interpublic, this is a

fine line. But if trodden with caution, it could be a lucrative one.



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