WASHINGTON: WPP's purchase of lobbying shop Quinn Gillespie & Associates (QGA) last week appears to be evidence that the sector remains a rare hot spot in a communications and marketing industry that is still attempting to regain its footing after two years of struggles.
The deal, announced last week, follows by just more than a month the purchase of fellow lobbying shop Dutko by private equity group Lake Capital. The terms of the QGA deal weren't disclosed, but sources said the firm, founded by Democratic lawyer Jack Quinn and current Republican National Committee chairman Ed Gillespie, was courted by various suitors, including five major advertising holding companies, private equity firms, and consulting firms.
Long viewed as a hot property, QGA was almost folded into Omnicom's Fleishman-Hillard last year, but the deal fell through at the last minute. Sources familiar with the WPP deal say that the holding company's success had mostly to do with the ad and PR giant's commitment to keep the firm independent, as well as the company's strength in Washington. WPP's properties include Hill & Knowlton and Burson-Marsteller, global PR agencies with strong public affairs practices.
For its part, QGA, which boasts a client roster than includes Hewlett-Packard, Sony, and Coca-Cola, and had revenues of $12.5 million in 2002, has been emphatic about its desire to maintain a way of doing business that has been highly successful in the firm's three years of existence.
"One of our prerequisites was having a partner that will allow us to remain independent," said Rick Powell, MD at QGA. "We are thrilled to have access to the WPP network. We will stay independent, and things will remain pretty much the same for us."
Powell said there won't be any changes in workforce size. "It's business as usual," he said.
Compared to other industry sectors, public affairs/lobbying has been growing consistently, said Abe Jones, MD and founding director of AdMedia Partners, the marketing-services- focused investment bank that brokered the deal for QGA.
"We think there will be other acquisitions in this space by both financial and strategic buyers," added Jones. "It's a combination of high-margin, high-growth businesses that provide an important service to major clients. It's really not something that you can easily build from scratch, although some have tried."
According to Jones, there's no sense that these shops' appeal would change if the Democrats were to regain the White House in next year's election.
"It has attractive margins versus the rest of the industry," he said. "And it seems to be attractive no matter who's in power."