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
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
’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
’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.’