NEW YORK: Besting suitors far and wide, Havas-owned Euro RSCG made its first major play in the US PR market by snatching up Middleberg + Associates and making it the centerpiece of its North American expansion plan.New York-based Internet specialist Middleberg, which generated dollars $11.4 million in PR income last year and claims it will bring in at least dollars 22 million this year, spurned the usual suspects and chose to partner with a network in dire need of a larger PR presence in the US.
"We're the only game in town," said CEO Don Middleberg.
While Euro RSCG boasted worldwide PR income of dollars 103.5 million last year, only dollars 3.5 million, or 3%, came from the US. Like many of its competitors, Euro and its Paris-based parent are developing a voracious appetite for PR firms.
Middleberg said he had three prerequisites for any deal. He didn't want to sell to a holding company that already had several PR units (which ruled out Omnicom, Interpublic and WPP); he wanted to retain the Middleberg brand; and he wanted to sell to a network with solid European ties.
He added that his 150-strong agency's lack of a global network was becoming more galling, and he recently lost a major pitch because of it. "It became obvious that we had to join forces or grow it internally," he said, before dismissing the latter option as being 'too long and expensive.'
Serious talks between Middleberg and Euro RSCG chairman and CEO Bob Schmetterer began three months ago. Although Middleberg denies it,several sources said the deal was delayed by news of Incepta's dollars 58 million purchase of Sard Verbinnen (PRWeek, April 24). Whether the Sard deal inflated Middleberg's asking price is not known, but it's obvious that Middleberg studied its parameters closely.
Abe Jones, managing director of Ad Media Partners, said Euro certainly paid a premium above the norm (eight or nine times earnings). Middleberg said his margins are 'substantially' higher than the industry average of 12-13%, which could easily put the price tag above what Incepta paid for Sard.
And since the stock deal includes earnouts over the next four to seven years based on top- and bottom-line results, 'The top price could be extremely high,' Jones said. Flush with cash, Middleberg said he plans to make some acquisitions of his own, with IR the first target.
Some sources wondered why Middleberg was placed inside Euro RSCG rather than within Havas' Diversified Agencies unit (which houses Creamer Dickson Basford and is separate from Euro RSCG). One source wondered where Middleberg's placement leaves CDB. 'Right in the dust where they've always been,' answered another.
Middleberg will now be known as Middleberg Euro RSCG, and Don Middleberg will not take a larger role within the Euro network: "I have no interest in running to Jakarta to solve a client issue"