A lot has changed in the last three years in PR. The dollars 75 million sale of Cunningham Communication, a dollars 23 million hi-tech shop, to a very bullish Incepta is further evidence of this. Yet it was only three years ago that Omnicom bought Fleishman-Hillard for only dollars 120 million. What would Fleishman, now the largest agency in the US, be worth today?
A lot has changed in the last three years in PR. The dollars 75
million sale of Cunningham Communication, a dollars 23 million hi-tech
shop, to a very bullish Incepta is further evidence of this. Yet it was
only three years ago that Omnicom bought Fleishman-Hillard for only
dollars 120 million. What would Fleishman, now the largest agency in the
US, be worth today?
According to PRWeek’s back-of-the-envelope calculations - and assuming
the same 18% pre-tax profit margins that it currently produces -
Cunningham Citigate will need to grow 26% every year for the next 13
years before Incepta will see a residual value from the acquisition. In
other words, it will need to be a dollars 450 million firm in 2013. Food
And what about Edelman? The sole remaining top 10 independent, Edelman
doesn’t need to build a global empire - it already has one. And the
family doesn’t exactly need the money. These two strengths have enabled
Edelman to remain steadfast in the wake of a procession of offers from
ad agencies desperate for more bulk, growth, profit and PR
Now we learn that CEO Richard Edelman is looking at a possible IPO to
convert stock into cash for loyal executives (see analysis, p11). The
problem he’s got is that no IPO will come up with the multiple of a
Whatever the solution, Edelman is in the fortunate situation where, at
least for the time being, it doesn’t need to do anything. Ad stocks have
peaked, while dot-coms have dived in droves. In the meantime, the
independence of Edelman remains a unique selling point, both for
employees and clients. And in a world where it gets harder and harder to
differentiate the offerings of the major agencies, that may be no bad
Cunningham needs staying power
Part of the complex equation to figure out with the dollars 75 million
purchase of Cunningham is how to keep hold of the staff who will need to
meet those profit goals that the agency must hit in order for earnouts
to kick in.
Andy Cunningham has no doubts that the agency will meet its profit
targets; after all, the targets are based upon numbers that were
crunched a year ago. But to get that payback, Cunningham needs to keep
her trusted lieutenants by her side as Citigate Cunningham makes forays
into new tech markets worldwide. And under Cunningham’s stock option
plan, the agency’s option holders are now fully vested in their new
Incepta shares and have no obligation to stay. None, that is, besides
the lure of future riches and their loyalty to the boss.
’If she’s not sharing the wealth, people will leave,’ remarked one
industry veteran. So what’s to stop people from cashing out now? In a
Not only is it in her best interests, but it’s ’in her nature’ to be
generous to employees, according to the owner of a hi-tech shop who
formerly worked at Cunningham.
Cunningham knows what’s at stake. ’If everybody helps the team go
forward, they get more money,’ she said, adding that all of her senior
people have been around at least five years. In hi-tech today, few stars
stay with one team for five years. But then, none of them have Andy
Cunningham at the helm.