SAN FRANCISCO: In one of the biggest technology PR acquisitions since the boom and subsequent bust, Next Fifteen has acquired OutCast Communications in a deal valued at $13 million. The final payout is subject to performance criteria.
Next Fifteen, parent company of tech firms Text 100 and Bite Communications, will initially pay $6 million in cash and stock for OutCast, with an additional $7 million over five years, depending on OutCast's performance.
Caryn Marooney and Margit Wennmachers, who will both serve as agency presidents, started the firm eight years ago. OutCast will be kept as a separate brand. Marooney and Wennmachers promised nothing about the firm would change, except that now they will report to Next Fifteen CEO Tim Dyson.
The acquisition comes on the heels of Yahoo giving OutCast its corporate communications account. Fleishman-Hillard previously managed that business and still retains several pieces of Yahoo work, including search, personals, and Yahoo's internet access relationship with SBC Communications. Fleishman lost the Yahoo HotJobs account to Euro RSCG Magnet earlier this year.
Yahoo joins a client roster that includes Dell, EMC, Macromedia, Mercury Interactive, and Salesforce.com.
Though reminiscent of the acquisition frenzy in the late 1990s, the Next Fifteen-Outcast deal doesn't quite signal a return to that mindset, said Abe Jones, MD at AdMedia Partners, an investment banking firm that focuses on marketing and media industries.
But it does reflect clients' interest in working with firms that are specialized, he said. There is a premium on firms that specialize in healthcare or public affairs or investor relations, and Next Fifteen recognizes that being specialized is equally important in tech, said Jones.
"Next Fifteen has benefited from being very focused," he said. "They aren't trying to be all things to all people. Their strategy is to stay focused and be a purveyor of best practices in tech PR. That's a strong strategy."
Richard Cline, president of Voce Communications, said the acquisition validates the small, specialized agency model. And Next Fifteen's move will certainly make the global generalist firms sit up and ponder their next moves. The larger firms would be wise not to underestimate Next Fifteen, said Cline.
"[Next Fifteen] is the elephant in the room," said Cline.
"I respect them. I don't think people understand how powerful they are."
OutCast will now have the infrastructure to grow geographically and to bring in disciplines previously outside its reach, including public affairs.