THE TOP 150 UK PR CONSULTANCIES 1998: MERGERS AND ACQUISITIONS - Beating a path to the sales. The market is booming in a way that we haven’t seen since the 1980s, but does that mean a bust could be looming in the distance? Robert Gray looks at who

One of the big stories of the last year has been the number of mergers and acquisitions among consultancies. To some, the way businesses have been snapped up has evoked memories of the late 1980s boom and, among those more inclined to worry, of the tough recessionary years that followed.

One of the big stories of the last year has been the number of

mergers and acquisitions among consultancies. To some, the way

businesses have been snapped up has evoked memories of the late 1980s

boom and, among those more inclined to worry, of the tough recessionary

years that followed.

Certainly there are some parallels to be drawn between a decade ago and

today. Then, as now, a growing economy gave clients the confidence to

commit substantial resources to their marketing budgets. For both

periods, the ramification of this investment in marketing and

communications was strong revenue growth for the consultancies; with

many posting percentage rises in fee income well into double digits. In

other words, the PR sector as a whole was strong.

It is in circumstances such as these that what are essentially ’people

businesses’ become more attractive investments - albeit harder ones to

manage and more open to caprice in their future prospects than

asset-based companies. For entrepreneurial consultancy owners,

favourable market conditions offer the opportunity to sell for a good

price. Last year, this happened rather a lot.

That is not of course to say that no one was buying or selling earlier

in the 1990s - ad agency group Abbott Mead Vickers, for instance, bought

corporate agency Fishburn Hedges and consumer specialist Freud

Communications several years ago, and appears to have purchased shrewdly

as both consultancies have continued performing strongly.

But even though there has been some merger and acquisition activity

through the early to mid-1990s, there can be no doubt that 1997 has been

a bumper year for consultancy M&As.

Omnicom bought the world’s sixth largest PR consultancy

Fleishman-Hillard in April last year. Although not a massive player in

the UK, where its fee income is currently below pounds 2.5 million per

annum, F-H does have over 25 offices worldwide and was very attractive

in global terms.

Later in the year, Omnicom converted its 20 per cent stake in hi-tech

specialist A-Plus into full ownership. Brodeur A Plus, as it is now

known, has UK fee income of over pounds 4 million.

’We’re in a period where people have forgotten the caution engendered by

the last recession,’ says Brodeur A Plus director Jonathan Simnett.

’You’re seeing that in the number of start-ups as well as in the mergers

and acquisitions.’

Omnicom, a diversified ad agency and a marketing services group, which

also owns top five agency Countrywide Porter Novelli, has been on

something of a buying spree in recent years. In 1996 it acquired

internal communications specialist Smythe Dorward Lambert and Ketchum

PR, which it then bankrolled to buy Scope Communications as a means of

strengthening its London operation.

Last year, another US purchaser came on the scene in the shape of PR

group Bozell Sawyer Miller, which snapped up consumer and corporate

consultancy Charles Barker for over pounds 10.5 million. The deal gave

BSM, a significant player in the US, a bridgehead into Europe where it

is looking to expand.

For Charles Barker BSMG’s directors - who re-established the company in

1992 through a controversial MBO following the collapse of its former

parent Corporate Communications - the transaction offered a number of

advantages aside from realising their investment in the business.

’One of the brilliant things about moving out of management-owned to

internationally-owned is that staff suddenly see there is blue sky and

more of a chance for them to progress than was the case when there was

the same small group of directors owning the business,’ says Charles

Barker BSMG chief executive Tim Sutton. ’It’s liberating for them.’

There were, says Sutton, a couple of shareholders who were keen to

sell-up.Moreover, the timing appeared propitious as Charles Barker BSMG

- at that juncture among what was only a handful of relatively large

independents in the UK - was ’coveted’ by a number of prospective


But there were strategic reasons for agreeing to the sale as well, says

Sutton. With more business being driven out of the US, the logic for a

trans-Atlantic tie-up of some kind became persuasive. With clients

seeking either international counsel from owned group networks or

specialist input from niche players, there was a danger of Charles

Barker BSMG being squeezed between agencies conforming to these two

business models.

’We could have carried on as we were for another four or five years but

I think it would have been increasingly difficult to get the capital for

the investment decisions that need to be made,’ adds Sutton.

Another interesting acquisition was Manning Selvage and Lee’s purchase

of food and business-to-business agency Handel Communications to bolster

its London operation.

During the course of the year, marketing services giant WPP (owner of

Hill and Knowlton and Ogilvy PR Worldwide) held talks with corporate and

City specialist Dewe Rogerson. It is not known how serious these were,

but speculation was fanned by the fact that a couple of the

consultancy’s founder owners are nearing retirement age.

Executive chairman Tony Carlisle declines to comment specifically on

Dewe Rogerson’s situation but sounds a general warning for any

organisation in the market to buy PR consultancies. ’If people want to

sell up for money you have to ask if they’re on their way out. Is it

because they’ve peaked or is there still substantial growth


In the normal course of events it is ad agency groups that buy PR


But last year Sir Tim Bell’s company Chime (owner of Bell Pottinger

Communications) turned convention on its head by snapping up HHCL, the

agency responsible for Tango’s wacky advertising. The move was seen in

some quarters as a means of boosting Chime’s share price.

At the other end of the market -where PR agencies can only dream of

having the clout to buy a successful ad agency - the rationale for

selling up is access to the capital and support necessary to build a

strong business.

’A big name opens doors and we now have access to a whole range of

resources we could never have dreamt of,’ says Jo Leah, who sold her

Manchester-based outfit Lawson Leah to McCann-Erickson PR.

The need for improved resources and the means to ’broaden the skills of

our people’ was what convinced The Business Works to merge with Hill

Murray Rogerson, says David Freedman, who was chairman of TBW and is now

an equity-owning director at HMR. Freedman thinks that some M&As might

be driven by the need for experienced people ’to manage rather than work

at the coal-face’ as they would have to continue doing if they stayed

with a small business.

Citigate, owned by parent company Incepta, made two purchases last year:

public affairs company Westminster Communications (in which it already

had a minority stake) and hi-tech specialist Hunt Thompson.

Citigate Technology managing director Suzy Frith says Incepta is looking

to purchase further IT PR agencies. She also expects there to be more

M&As in the marketplace.

’There will be more consolidation in the IT PR industry because a lot of

client companies in the IT sector are themselves consolidating. These

clients also want a great deal more in terms of strategic skill and

experience from their consultancies. It’s very hard to be a small

player--so there will be more merger and acquisition activity.’

Have you registered with us yet?

Register now to enjoy more articles and free email bulletins

Already registered?
Sign in