A banner in the lobby of Powell Tate’s DC office boasts: ’The most powerful city in the world has a new leader. Shandwick Washington.’ But who leads the new leader?
A banner in the lobby of Powell Tate’s DC office boasts: ’The most
powerful city in the world has a new leader. Shandwick Washington.’ But
who leads the new leader?
When Shandwick bought the Cassidy Companies last month in a deal
reportedly worth dollars 70 to dollars 80 million, a slate of newcomers
were boosted into top positions within the acquiring company’s DC
office.
One of the biggest winners is Jody Powell, the new CEO and chairman of
Shandwick Public Affairs (SPA). He and new SPA vice-chair Sheila Tate,
his cohort from Powell Tate, and David Krawitz, who was and will remain
president of SPA, are striving to meld two corporate cultures into one
winning PR firm.
Powell, a former press secretary to President Jimmy Carter, brings
heavyweight Beltway gravitas to the party. And Powell Tate is chock full
of senior public affairs pros. Its reception area has the potted plants
and traditional furniture one would expect to find in a law firm
Shandwick is a younger firm by Washington standards, and aggressive,
with new offices that could be described as LA-ish. (Nothing’s settled,
but Shandwick may be departing its new digs for the building in which PT
is housed.) Its fee income grew 50% last year, while income at the more
traditional PT stood still (see Washington report, p26).
The mastermind behind the growth of Shandwick’s public affairs practice
is Michael Petruzzello, the DC-based CEO of Shandwick US. Petruzzello is
a New Yorker, while Powell hails from a small town in Georgia. It’s yet
another demonstration of a potential clash of cultures.
Powell came to DC almost 23 years ago to serve as Jimmy Carter’s press
secretary. He still has a Southern drawl and an irreverent style,
despite spending over two decades in Washington among the city’s movers
and shakers.
One DC pro familiar with both firms suggests Petruzzello can gain a
great deal from Powell’s presence: ’Petruzzello’s a young guy working
his way up in PR. He may want to do all he can to inherit whatever Jody
Powell chooses to give away.’
Shandwick’s link with lobbyist-businessman Gerald Cassidy and Powell
serves both companies’ needs. Cassidy had built a mega-government
affairs operation: his own lobbying firm with Democratic ties
complimented by a similar Republican-leaning firm, and also the public
opinion research firm of Frederick Schneiders, the litigation
communications firm of Bork & Associates, and Powell Tate.
Powell says Cassidy expressed interest in going public in 1998, but the
initial IPO interest died down due to shaky financial markets. The
company replaced its original investment house with Donaldson, Lufkin
and Jenrette, which is credited with brokering the match.
Powell will not talk specifics about the deal, but what is interesting
is that Cassidy’s initial IPO was for dollars 40 million, and the price
tag of the deal is reportedly double that. Clearly, Shandwick wanted
this deal badly.
The mechanics are thus: Powell Tate merges into SPA, while the other
Cassidy firms continue operating under their own names, but under the
Shandwick umbrella. Cassidy becomes chairman and CEO of Shandwick’s DC
operations. Shandwick Washington should become the biggest player in the
market, jumping ahead of perennial leaders Burson-Marsteller and Hill &
Knowlton.
One head of a local PR firm commented that Shandwick’s deal has ’created
a forceful presence in the marketplace in Washington. The question is
how will that change Shandwick as a company and who do they want to
become?’
In Powell’s view, the companies have more in common than what
superficial impressions suggest. He says his immediate goal is to ’bring
these two organizations (SPA and PT) together successfully’ which, when
combined, represent approximately 160 employees and an estimated dollars
25 to dollars 30 million in fee income. When you factor in the rest of
the Cassidy companies, and the non-public affairs part of Shandwick’s DC
office, the figure rises to dollars 75 million.
Coming into the Shandwick network is a plus, says Powell, because he
knows all too well the cyclical nature of the public affairs
business.
The first nine months of 1998 were prosperous, but things slowed down
once Washington focused on the impeachment. PRWeek figures show Powell
Tate registered flat growth in 1998 - up 1% to dollars 15.7 million - at
a time when other big DC firms with more diversified practices were
posting double-digit income gains.
Petruzzello contends that public affairs is a key component of his
expansion plan - not just in the US, but in cities such as London and
Tokyo. And he says that Powell ’will be helping lead our public affairs
practice worldwide.’
But first there is the merging of the firms to complete. Although Powell
says that the big play offers strong potential, he admits it will take
work. ’It’s really a coming together of equals,’ he insists, allowing
that it could very well make it a bit harder to merge practices of
approximately equal size and reputation.
In such acquisitions, Powell says there is usually a loss of revenue, at
least in the first year. ’That’s understandable. You have to spend a lot
of time doing things other than business,’ he admits, adding that a
struggle to maintain and replace key talent also ensues.
’In some cases,’ Powell says, ’you have situations in which the
companies never regain their standing. It’s important that we get this
right.’ The staffs will be consulted on what they consider to be their
companies’ strengths and what principles should guide the blending of
distinct corporate cultures.
Naturally, there is the uncertainty that occurs in such mergers. A story
circulating around PR circles is that at one meeting between the two
staffs, Powell read an anonymous comment made by a Shandwick employee
wondering whether they would receive the more generous Powell Tate
salaries. Then he read one from a Powell Tate employee that credited
Shandwick salaries with being larger and wondering whether they would be
matched. Powell then tossed the papers in the air, to the amusement of
those present.
Now, it’s up to Powell to put the pieces together so that bigger truly
is better.
Jody Powell
Chairman and CEO
Shandwick Public Affairs
1970-81 - Press secretary for Jimmy Carter
1982 - Political columnist and analyst 1987 Chairman and CEO
Powell Adams & Rinehart
1991 - Chairman and CEO/Powell Tate
1999 - Chairman and CEO of Shandwick Public Affairs.
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