2005 Agency Business Report: <strong>Euro RSCG Magnet</strong>

Owned by Havas (part of Euro RSCG Worldwide)

Owned by Havas (part of Euro RSCG Worldwide)

Aaron Kwittken, CEO

Number of offices: Six in the US: New York, Washington DC, Chicago, Southern California, San Francisco, and Pittsburgh. Globally, Euro RSCG Magnet comes under Euro RSCG PR Worldwide, which has 36 offices.

Staff numbers: Current headcount is 120 employees. Headcount was reduced by 20 as a result of the April merger between Magnet Communications and Euro RSCG Middleberg. Numbers were reduced across administrative and lower level account positions.

Staff turnover: Magnet gives figures not inclusive of the layoffs, citing less than 10% for professional staff, account supervisor and above, and less than 17% those below that level.

Senior hires: Include Roy Bumsted, EVP/consumer (New York); Jose Moreno, VP/Latino (SoCal); Mike Smith, EVP & GM/Washington DC/public affairs; Steve Hoechster, SVP/technology (New York).

Senior departures: David Kratz, CEO; Paul Jensen, president; Phil Armstrong, GM/Washington, DC; Cliff Berman, consumer practice leader, New York; Don Middleberg, chairman (now consulting with the agency again).

Senior management changes: When Magnet and Middleberg merged in April 2004, David Kratz became CEO. When Kratz left in the fall, Aaron Kwittken, formerly president, became CEO.

What region is growing? The US is expected to grow in excess of 10% this year.

Mergers and acquisitions: Magnet Communications and Euro RSCG Middleberg merged on April 1, 2004 to form Euro RSCG Magnet. Euro RSCG Magnet acquired the US operations of Grayling on January 1, 2005.

Number of practice areas: Eight - corporate and financial communications; b-to-b; public affairs; consumer and buzz marketing; healthcare; technology; identity; crisis and issues management; multicultural communications.

Which are new? Latino has been expanded to include African-American, Asian-American, gay and lesbian. Magnet also added a sub-practice, government IT, under public affairs, and we launched a buzz offering to its consumer marketing practice.

Distribution of accounts across practice areas: Corporate, financial and b-to-b: 35%; consumer and buzz marketing: 20%; healthcare: 20%; technology: 15%; public affairs: 5%; identity: 5%.

Key account wins: Heineken USA; Yahoo Hotjobs; Comcast; Reckitt Benckiser; AIG; Banco Popular (AOR)

Key account losses: Bombay Sapphire and Weightwatchers.com were resigned due to merger conflict. Also lost Foxwoods (client stated it was due to the merger), Jenny Craig and Gartner.

Proportion of clients on a retainer: 62%

Has this changed over the past year? Magnet has reduced fixed retainer mix from 84% to 62% in favor of doing more time-based engagements.

Did revenues meet expectations? Met expectations on both top-line and EBIT. The agency experienced flat growth top line due to key wins in the second half of the year offset by forced attrition of non-strategic accounts as the merger shook down. Also, as a result of the merger, experienced bottom-line growth, which met our expectations.

Outlook: Last year saw two key changes with the exits of CEO David Kratz and president Paul Jensen following the merger of Magnet Communications with Euro RSCG Middleberg. Former Middleberg executive Aaron Kwittken ascended to the CEO spot. "We see ourselves as a challenger agency," Kwittken says of his strategy going forward, aiming to lead integrated programs with other Euro partners.

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