Ketchum buys Capstrat in third agency deal in a week

NEW YORK: Ketchum said Wednesday that it has bought Raleigh, NC-based independent firm Capstrat in the industry's third significant acquisition of the past week.

NEW YORK: Ketchum said Wednesday that it has bought Raleigh, NC-based independent firm Capstrat in the industry's third significant acquisition of the past week.

The deal will strengthen Ketchum's position in the South, while also adding Capstrat's capabilities in public affairs, healthcare, energy, and technology to the Omnicom agency. Capstrat's creative, social media, and analytics services are also complimentary to Ketchum, the Omnicom firm said in a statement. It added that Capstrat has a “diverse client base across the healthcare, energy, technology, and professional services industries.”

"[Capstrat is] a really powerful brand," said Ketchum COO and CFO Rob Lorfink. "That brand is very powerful in the sectors where they work and in that region."

Capstrat will continue to use its own brand, and founder and CEO Ken Eudy will still lead the firm as part of Ketchum's North American operations. President Karen Albritton, creative chief Todd Coats, and CFO Debbie Reed will also help to lead the agency, which will maintain its Raleigh, NC, headquarters. No layoffs are expected to take place, said Lorfink.

Eudy noted that the deal came together quickly and that he has known both Flaherty and former Ketchum CEO Ray Kotcher for years through industry organizations. He said being able to serve clients globally was a driving factor in selling the firm to Ketchum.

“Increasingly, we have clients and prospects that ask us to support them in different parts of the world, and there are times when we need someone in a different geography. So Ketchum's reach was very important to us,” he said.

Capstrat saw a 20% increase in revenue in 2011 to $14.2 million, compared with the year prior. It attributed 90% of that growth to current clients. Although he did not disclose specific numbers, Lorfink said Capstrat's revenue is “definitely higher [than 2011] and their growth rate was very strong in 2012.” Its headcount as of 2011 was 97.

Other Ketchum subsidiaries are Access Communications, MMG, Zocalo Group, and Harrison & Shriftman. Lorfink said that his agency intends to make Capstrat “fully part of Ketchum” and that the firm will be “far from a conflict shop.”

The deal is the third prominent agency acquisition in the past week. Japanese powerhouse advertising agency network Dentsu bought Mitchell Communications on Friday in the first step in its goal of building out a PR network of its own. On Monday, sports, fashion, and media company IMG Worldwide said it acquired Catalyst Public Relations as it looks to expand into the communications space. Financial terms were not released for either deal.

Ketchum's global revenue in 2011 was between $400 million and $450 million, including $250 million to $300 million in the US. It has more than 70 offices worldwide and about 2,500 employees. Last June, the firm promoted Rob Flaherty to CEO, replacing Kotcher, in a long-expected leadership transition. Kotcher moved to the role of chairman at that time.

This story was updated on January 9 with quotes from Lorfink and additional context. It was updated again on 2:15 pm with quotes from Eudy.

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