Similar to other markets around the world, consolidation was a major theme in the UK last year. A wave of mergers and acquisitions sent respectably performing agencies tumbling down the rankings, as well as ensuring that only one independent?Edelman?remained in the top 10.
Leading agency IPR, parent of Shandwick, Golin/Harris and Weber, surrendered its independent status by selling out to US communications giant Interpublic.
It subsequently changed its name to International (rather than Independent) PR. Its new owners will be pleased to see that it retained the top slot.
But the deal that caused all the furor was the takeover of Dewe Rogerson by Citigate's parent company, Incepta. The dollars 43.2 million agreement at the end of last year propelled the merged Citigate Dewe Rogerson into third place with an 8% income hike. The move shunted Hill & Knowlton down one slot, despite its impressive 24% income growth, and also robbed Countrywide Porter Novelli of fourth place.
'Consolidation is the most visible trend at the moment and it's likely to continue for some time,' says Countrywide managing director Paul Miller.
'We saw a similar period in the 1980s, until the recession hit. At the moment the economy is healthy, so there's a lot of growth and a lot of potential.'
'The trend is also being caused by the increasing interest of international communications groups in PR, coupled with a desire among agencies for a global reach,' Miller adds.
There were other significant moves. In March, successful agency Charles Barker added the BSMG suffix to its name following its takeover by US group BSMG Worldwide in 1997. The agency's more international outlook was reflected by the appointment of Charles Barker chief executive officer Tim Sutton to the role of BSMG Europe CEO.
One place below Charles Barker, Ketchum was catapulted into the top 10 when it acquired Life PR from its Omnicom sister company GGT, helping to boost income by 69%. In its former incarnation, Life was Lynne Franks PR, founded by the one-time doyenne of the UK PR scene and the inspiration for the sitcom Absolutely Fabulous.
Further down the charts, GCI/APCO boosted its income by 45% and moved up two places to number 14 after buying its affiliate, Focus Communications.
The recent wave of consolidation has provoked speculation that the UK's middle-sized agencies face an uncertain future, stranded between the multinational giants and the specialist boutiques. But one industry source, who does not wish to be named, says: 'There's a danger that agencies are just buying scale. Clients don't simply look for size?they also look for skill and strategy. In that respect I believe the medium-sized agencies will be able to differentiate themselves.'
In fact, the bigger agencies are beginning to recognize that the specialists represent a threat, particularly in the rapidly-growing healthcare and hi-tech sectors.
Peter Hehir, UK chairman of Porter Novelli International, says: 'We must prove that although we're larger organizations, we work well in specialist areas. Clients are wiser now and they don't automatically appoint a large, well-known agency.'
His thoughts are echoed by Jason Gallucci, business development director at Hill & Knowlton. 'One of the biggest problems facing larger agencies is that they are perceived as too generalist compared to the specialist boutiques.' H&K has seven specialist units effectively acting as separate agencies. 'The selling point to clients is that we can orchestrate these units to provide an integrated campaign,' Gallucci says.
Among other challenges facing the industry, evaluation is still high on the agenda, with agencies devising various ways of tackling the issue.
James Thellusson, managing director of Cohn & Wolfe, says the agency is rolling out an approach based on traditional advertising criteria like frequency and impact. 'The big issue is still value for money. Clients are increasingly asking this question right up front.'
More and more, shops are realizing that planning and evaluation helps raise the standing of the industry within the marketing mix. Gallucci believes planning is especially key. 'Evaluation has been the focus of attention, but pre-campaign planning is equally important,' he says. 'You need a strategic process to drive creative ideas. I believe PR agencies will increasingly start to behave much more like advertising agencies or management consultancies?spending much more time researching the brand and defining its positioning.'
Consolidation has also given agencies access to a wide range of disciplines.
Gallucci says H&K regularly works on accounts with other arms of the WPP group, from designers to advertising agencies. 'The boundaries,' he says, 'are blurring.'
The appointment of number 18 Fishburn Hedges, which beat out a number of major advertising agencies, as lead agency for a worldwide review of oil giant Shell International's communications strategy was a coup.
Agency CEO Neil Hedges comments: 'PR is no longer seen as the second string?it is now being given more of an equal role with advertising.'
Another issue peculiar to the UK is the government's seeming lack of commitment to the single currency. Thellusson says this could have a bearing on international business.'Overseas clients are confused about whether Britain is in or out of Europe, both in attitude and in terms of the euro.' This raises questions about the UK's status as the hub of the European PR industry.
'Clearly it is the most sophisticated and complex market outside the US, but whether it can maintain that position remains open to question.'
Whatever the future holds, the climate right now is one of increased confidence and optimism, despite earlier rumors of recession. Countrywide's Miller notes: 'At the end of 1998 things got a little shaky and it looked as if there might be a slow-down, but it seems we managed to pull out of it. Now it's almost as if that odd pause never existed.' Thellusson agrees: 'It's clear that the harbingers of doom have been proved wrong. The market is still growing and still vibrant. The standing of the industry is also rising.'
Overall, the income of the UK's top 150 agencies rose by 17% to just over dollars 697 million, compared to dollars 585 million the previous year.
The number of clients who employed a PR agency increased by 10%. Combined fee income generated by the top 10 agencies was more than dollars 302 million, which represents 43% of the total market, while the tier from 11 to 20 took a 14% share.
This growth in business caused an attendant rise in staffing levels.
While the number of employees in the top agencies stayed almost static between 1996 and 1997, last year they employed 14% more people.
Average income per head increased by 2% to just over dollars 100,000.
EUROPEAN AGENCIES: UNITED KINGDOM
Rank Company Fee income (dollars) Growth 98 98 97 %
1 International Public Relations*1 58,638,400 57,281,600 2
2 Bell Pottinger Communications*2 48,136,000 37,822,400 27
3 Citigate Dewe Rogerson*3 42,452,058 39,193,374 8
4 Hill & Knowlton (UK)*4 37,272,000 30,004,800 24
5 Burson-Marsteller* 28,667,200 23,123,200 24
6 Countrywide Porter Novelli*5 28,660,176 27,262,451 5
7 Charles Barker BSMG*6 15,403,352 13,309,176 16
8 Ketchum7 15,372,686 9,077,562 69
9 Edelman PR Worldwide* 14,294,131 11,403,680 25
10 Euro RSCG International Comms*8 14,135,099 13,035,346 8
11 Grayling Group*9 12,944,800 11,105,120 17
12 Text 100* 12,367,114 9,891,978 25
13 Medical Action Communications 12,032,000 10,448,000 15
14 GCI/APCO*10 11,874,720 8,174,560 45
15 Freud Communications11 9,557,362 8,807,013 9
16 College Hill Associates 9,050,058 7,436,523 22
17 Cohn & Wolfe* 8,638,696 6,700,133 29
18 Fishburn Hedges 8,004,946 7,267,210 10
19 Key Communications* 7,870,400 6,820,819 15
20 Harrison Cowley 7,759,106 6,081,706 28
21 Harvard Public Relations 6,996,800 6,902,400 1
22 Brodeur A Plus* 6,902,496 6,555,131 5
23 Firefly Communications* 6,771,864 5,296,315 28
24 The Shire Hall Group*12 6,755,200 6,667,200 1
25 Richmond Towers 6,720,000 6,368,000 6
Rank Company Location Status 98
1 International Public Relations*1 London IPR network
2 Bell Pottinger Communications*2 London Chime Communications group
3 Citigate Dewe Rogerson*3 London Incepta subsidiary
4 Hill & Knowlton (UK)*4 London H&K subsidiary
5 Burson-Marsteller* London B-M subsidiary
6 Countrywide Porter Novelli*5 Oxon PNI subsidiary
7 Charles Barker BSMG*6 London BSMG subsidiary
8 Ketchum7 London Ketchum subsidiary
9 Edelman PR Worldwide* London Edelman subsidiary
10 Euro RSCG International Comms*8 London Euro RSCG subsidiary
11 Grayling Group*9 London Grayling Group
12 Text 100* London Text 100 subsidiary
13 Medical Action Communications Surrey Quintiles subsidiary
14 GCI/APCO*10 London GCI subsidiary
15 Freud Communications11 London AMV subsidiary
16 College Hill Associates London Independent
17 Cohn & Wolfe* London C&W subsidiary
18 Fishburn Hedges London Omnicom 2000 subsidiary
19 Key Communications* Oxon Independent
20 Harrison Cowley Various Independent
21 Harvard Public Relations Middx Independent
22 Brodeur A Plus* Berks Brodeur subsidiary
23 Firefly Communications* London Fireworks network
24 The Shire Hall Group*12 London Independent
25 Richmond Towers London Independent
All figures relate to the year ended December 31, 1998;
Fee income = PR fees + mark-up;
* Denotes PRCA member;
1 Includes figures for Shandwick, Golin/Harris and Weber groups of companies;
2 Includes figures for Green Moon, First Financial, Michael Humphreys and Partners, Smithfield Financial, Keith McDowall Associates, Environment Marketing, Lury Price Associates, In Real Life and Interactive Bureau;
3 Formerly listed as Citigate and Dewe Rogerson. Merged company includes figures from Citigate Westminster;
4 Includes figures for Drum Venture Comms;
5 Includes figures from Affinity;
6 Includes figures from Slam, Gibbs Associates and LSA;
7 Includes figures for Lynne Franks and Life PR, now Ketchum Life;
8 Includes figures for Biss Lancaster, Greenwood Tighe and CGI;
9 Includes figures for Westminster Strategy and Strategy in Scotland;
10 Includes figures for GCI Focus;
11 Includes figures for Aurelia PR;
12 Includes figures for 4D Communications;
13 Includes figures for the Counsel Group;
14 Figures are from merged companies Choat and Partners, and Nexus Public Relations