Freuds to use £25m 'war chest' to fund international expansion

Freuds has amassed a £25m 'war chest' and is looking for suitable partners for a second attempt at international expansion.

Freuds to use £25m 'war chest' to fund international expansion

In an exclusive interview with PRWeek – which will be published online tomorrow – the agency's founder Matthew Freud said that his agency was looking for ways to expand beyond its single London office.

"We are actively engaged in conversations with a number of businesses to explore what collaboration might look like," he said. However, he did not reveal whether that would be through acquisition, or partnership.

Asked why his company’s accounts for the calendar year 2014 show shareholder funds of £25m (calculated by subtracting current liabilities from total assets) he said: "We are a unique business in that we are independent and debt free. As it happens we are reasonably flush and we’ve got a global client base that currently we’ve been able to service from a single office here through a lot of people spending a lot of time on planes.

"There are opportunities to find like-minded businesses that don’t want to fold into a global group and don’t want to sell out to a private equity company," he added.

Freuds has been one of the most successful UK PR agencies of the past three decades but despite many international accounts, it has never managed to transfer its UK success to the global stage.

Freud sold the company to ad agency Abbott Mead Vickers in 1998 but bought the company back in 2001. In 2005, Freud sold Publicis 49 per cent of the business and opened a New York office, which then folded into local agency HL Group in 2009. Freud bought his company out of that arrangement in 2013.

While Freuds’ accounts show £25m in cash, the agency could spend significantly more than that if it chose to borrow, according to Keith Hunter, managing partner at business consultancy ResultsIG, which specialises in merger and acquisition advice to the marcoms sector.

He said: "£25m is a significant war chest for an independent agency. It would buy them one medium-sized agency of between 50 and 100 people. But it could also borrow to finance expansion. Borrowing would be determined by profitability. Generally you can borrow two or three times profits."

As Freuds’ accounts show a profit of £7.6m last year, adding a loan to the existing £25m would mean it could bring its acquisition budget to nearly £50m. However, Freud told PRWeek that he was proud of never having borrowed money to fund his business.

Check back on for the full interview tomorrow, and in the new November edition of the magazine, out this week.

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