Hope Hicks quit the comms director role at the White House and brands cut links with the NRA following the Parkland school massacre, but the biggest PR story of this week was the historic merger of Burson-Marsteller and Cohn & Wolfe.
The two WPP shops combine under the leadership of Donna Imperato and the brand Burson Cohn & Wolfe, with Burson CEO Don Baer moving into the chairman’s seat at the new firm.
Imperato is a formidable and proven operator, and if anyone can bring the two disparate companies together, she can. But her corporate chops will certainly be tested, and merging the two very different cultures will be challenging.
She has already overseen one smaller merger, in 2008, when Cohn & Wolfe swallowed up sister WPP agency GCI Group, with a similar stated aim of creating a global powerhouse to compete with the top global firms.
GCI retained its healthcare work and is now known as a specialist in that area, but its consumer, corporate, and public affairs billings either disappeared or were swallowed up by its new host agency.
Then, just as now, Imperato was made CEO of the combined operation and GCI CEO Jeff Hunt became president – Hunt stepped down three months later.
It will be fascinating to see if Baer stays on as chairman at Burson Cohn & Wolfe or if he, like Hunt, heads off to pastures new.
For now, he told me the following via email: "Under Donna’s passionate and proven leadership, Burson Cohn & Wolfe will be a global integrated communications powerhouse, delivering the most outstanding and innovative services in the entire communications world.
"As chairman of the new organization, I am thrilled to work with Donna and provide high-level counsel to Burson Cohn & Wolfe clients."
Baer is a superb political and media operator, with significant experience and connections on The Hill from his days as White House Communications Director and CEO of Discovery Communications. He is also an excellent client counselor, and there are those who suspect he was always a slightly reluctant agency CEO, a very distinct role with skillsets focused on management rather than the high-level consultancy he most enjoys.
It will also be interesting to see how some of the more stodgy elements of the Burson-Marsteller organization that oversee big chunks of revenue take to Imperato’s go-get-‘em management style. But, the fact is, corporate reputation work is becoming very project-oriented and scalable growth potential lies more in C&W’s sweet spots of health, consumer, technology, and integrated assignments.
Putting the correct jigsaw pieces in place across two large organizations is crucial and some talent will depart. There will be rationalization and merging of centralized departments, whatever the principals say in the first instance about no executive departures resulting from the merger.
The accountants at WPP will want savings to be demonstrated at the new scaled-up entity. Back office is where efficiencies are usually first identified across respective finance and IT functions.
But the reality is both firms presumably have long-term leases on their properties in New York, so it will take a while for proper co-location at HQ level. Cohn & Wolfe is not as strong as Burson in DC, so that territory would most likely fold into B-M’s operation. The jury is still out on London, but there will probably be physical co-location in many other global markets.
It is a big rationalization opportunity to close redundant offices in smaller territories at both firms around the world. Rival holding company Omnicom did this in a different way in Europe, by combining FleishmanHillard, Ketchum, and Porter Novelli’s operations as Omnicom PR Group in Spain, France, Italy and the Netherlands.
There have also been consolidations in other parts of WPP’s empire, such as Wunderman and Possible in the direct marketing and digital creative space, and media agencies MEC and Maxus.
Pivotal Research analyst Brian Wieser told me: "Agencies have always looked for efficiencies where possible, and in spaces where agency brands are not sufficiently differentiated, combining them and finding ways to create walls or otherwise satisfy client concerns around conflicts.
"Clients are pushing to reduce fees more than before and have had to be increasingly flexible about conflicts, at least so long as agencies have become more creative in finding solutions to meet client needs."
One thing is for sure, after years of male domination atop the PR agency league tables, this deal means that within four months there are now two female CEOs among the top five global PR firms - Imperato and Ketchum's Barri Rafferty - which is most certainly welcome.
The merger also gives WPP boss Martin Sorrell a top-three PR firm with the scale to compete against the big beasts over at Edelman and Weber Shandwick.
And, as the leader of the world’s biggest PR firm, Richard Edelman, noted when I asked him for his reaction to the deal: "This makes Burson Cohn & Wolfe a global, multi-skilled competitor with strengths across corporate and brand."
Burson’s star has fallen since the days when it was the undisputed number one firm in the world. It now languishes at half the revenue of Edelman’s standard bearer and showed little sign of returning to growth that might narrow the gap.
The Harold Burson-founded firm is now part of an "at-scale" organization again, taking over the third spot in the global agency league table from FleishmanHillard.
The merger is a reward for Imperato’s four successive years of double-digit growth at Cohn & Wolfe, which propelled the firm up more than 50% from its $157 million revenues in 2013.
In 2017, it grew 10.3%, with profits up 11.5%, to hit a global figure of around $240 million. That followed growth of 12% in 2016, 11% in 2015, and 12% in 2014. Some of that is down to acquisitions, but there is significant organic expansion in there as well.
If we assume Burson was flat in 2017, at around $450 million, that produces a combined agency with $690 million in revenues, easily the third largest ahead of F-H but still some way behind the two leaders.
The deal will inevitably spark speculation about consolidation across other holding companies, with the future of Omnicom’s Porter Novelli once again likely under the spotlight. For example, a combined F-H/Porter Novelli operation would boast revenues of around $740 million based on PRWeek’s 2017 Agency Business Report rankings, putting it back into third spot.
However, it should be noted that Omnicom PR Group CEO Karen van Bergen remains adamant that "such a merger is not under consideration, and we believe in the strength of our individual brands."
Global scale is certainly important, and breakout markets for C&W in 2017 included Hong Kong (up 52.6%), Germany (up 32.5%), China (up 21.7%), India (up 19.3%), and Mexico (up 14.6%), so the firm is still producing double-digit growth in emerging markets that larger and more mature operators such as Edelman have already garnered.
Multi-market wins last year included Kite Pharma in Los Anegeles, New York, and the U.K.; Regus in New York, the U.K., and China; Tencent in New York, China, and Hong Kong; and Zoll Medical in New York and Germany.
On paper, the two merging firms are compatible, with Cohn & Wolfe’s creative, content, consumer, and health expertise complementing Burson’s corporate and public affairs chops. But the respective firms’ cultures are very different.
"Burson has strengths where we are not strong, like public affairs and corporate," Imperato told PRWeek’s Diana Bradley when the deal was announced. "Cohn & Wolfe [is strong] on the digital creative content side, consumer, and healthcare. We both have technology. We are going to create the world’s largest technology practice."
History suggests that, as with most deals like this, the newly combined Burson Cohn & Wolfe operation will slide backwards a little before it can move forward.
That seemed to be the case with C&W’s aforementioned previous merger, when it absorbed GCI, and another reverse takeover in WPP’s PR and public affairs group. In 2011, Public Strategies merged with Hill & Knowlton and, soon afterward, the smaller agency’s founder Jack Martin ousted Paul Taaffe as H&K CEO to assume control of the entire operation. Seven years on, the synergies of that deal have yet to be demonstrated by scalable growth.
But it’s a challenge Imperato will relish. Her firm regularly receives plaudits from Sorrell in WPP’s quarterly earnings releases, including on Thursday morning. A negative overall Q4 and full-year 2017 report was leavened by another positive note for Cohn & Wolfe, which Sorrell said "performed particularly well," in the context of a PR and public affairs group that rose organically just 1.7% in 2017.
Cohn & Wolfe attributes its sector-bucking success to an innovative complete brand experience methodology and continuing competitive advantage in earned media that established its reputation as a progressive, integrated marketing communications agency.
Both newly merged firms are officially subsidiaries of creative shop Young & Rubicam under the overall WPP umbrella, although Cohn & Wolfe’s New York HQ – its highest-performing office - is actually located in the Grey Advertising building adjacent to Madison Square Park, and the latter two firms have won a number of integrated projects together.
With the Burson Cohn & Wolfe merger, and Ogilvy’s rebranding last year under the One Ogilvy banner, losing discipline-specific nomenclature such as Ogilvy PR and Ogilvy & Mather, the make-up of WPP’s PR group is changing fast. When I asked him, Sorrell declined to say whether there would be other consolidation, involving H+K for instance.
Sorrell did confirm, however, that WPP would continue to report its revenue numbers in the same buckets, including Ogilvy’s PR offering. Those buckets are: PR and public affairs; advertising media investment management; data investment management; branding and identity, healthcare & specialist comms.
PR and public affairs is the smallest of the buckets, representing $1.61 billion of the group’s $21 billion total revenue in 2017, but Imperato has long been one of Sorrell’s favorites in a holding company sometimes accused of lacking charismatic leaders.
When Cohn & Wolfe took over GCI to create a so-called super-agency, a source close to the business told PRWeek: "Donna Imperato is running the show."
Ten years on, as the old saying goes, plus ça change, plus c'est la même chose.
* This piece was updated on 3/2 with email quotes from Don Baer and Karen van Bergen.