Agency Takeovers: PR and ad firms can exist in wedded bliss - If Sir Tim Bell’s Chime Communications is successful in buying advertising agency HHCL it will reverse the roles that both kinds of agencies usually play in these types of takeover

The PR world is accustomed to seeing advertising agencies swallow up PR agencies in multi-million pound deals.

The PR world is accustomed to seeing advertising agencies swallow

up PR agencies in multi-million pound deals.



Yet, if speculation that Sir Tim Bell’s Chime Communications is poised

to acquire ad agency HHCL and Partners proves correct, the boot next

time around will be firmly on the other foot.



But, should the deal go through, and the usual junior (PR) and senior

(ad agency) roles are reversed, most agree that it will be a good

match.



Shareholders of HHCL, led by Rupert Howell, will cash in their chips for

up to pounds 20 million. Meanwhile the addition of an ad agency group to

Chime may help it tackle the City’s aversion to PR-led businesses and

boost the persistently low rating of its share price.



But are such marriages between PR agencies and advertising firms always

made in heaven?



Abbot Mead Vickers has acquired a veritable harem of PR outfits over the

past three years, with take-overs of agencies Freud Communications,

Fishburn Hedges and Aurelia PR, in earn-out deals which could cost the

advertising-led group over pounds 28 million.



But AMV chairman Peter Mead is in no doubt that placing PR operations

with broader marketing services groups makes sense for all

concerned.



’Our group companies continue to develop relationships with each other

and to generate referrals,’ said Mead, unveiling AMV’s interim results

last week.



’The number of clients using three or more companies continues to

increase and we saw more joint company pitches as the trend towards

integrated marketing continues.’



Quentin Bell, chairman of independent PR agency The Quentin Bell

Organisation, says that PR agencies are often absorbed into ad agencies

when shareholders are faced with takeover offers which are too good to

refuse.



Top PR agencies may have far smaller turnovers than ad agencies, but

will often work on far superior margins, he says, so PR agencies are

attractive to ad agencies seeking to boost their profit margins and can

justify the acquisition with arguments of synergies with their core

business.



But Bell questions whether clients or the acquired PR agencies

necessarily benefit from the one-stop shop concept.



’Ownership by a particular company is no guarantee of quality across all

the marketing services an agency has to offer. Some clients don’t like

buying into a one-stop shop, and often think that they have more power

if they cherry pick agencies on their own,’ he adds. ’Putting all your

eggs in one basket can have its disadvantages.’



Nick Wiszowaty, managing director of Freud Communications, insists his

agency has benefited from business referrals within the AMV Group, with

many clients happy to at least have the option of a single-buy

solution.



’AMV will sell in Freud’s service if there’s an opportunity,’ he

says.



’There have been instances in the past where we have been involved in

group pitches, where the client buys into one or two elements but not

the whole package.’



Freud has worked alongside AMV sister agencies on consumer brand

campaigns for clients including Pepsi and Volkswagen since it signed its

pounds 8.4 million earn-out deal at the end of 1994 - since adjusted to

a maximum of pounds 10 million.



But concern among some client companies about divulging marketing plans

to PR agencies connected to ad agencies who work for rivals can verge on

the paranoiac.



Wiszowaty concedes that an ad agency connection can work against, as

well as for, a sister PR agency.



’I’m sure that some companies have avoided us because we are part of

AMV,’ he says. ’But a lot of clients say that they want their agencies

to work more closely together, so it does help if agencies are linked in

some way.’



PR agency acquisitions are not always based on seeking synergies with

local advertising agency partners.



Charles Barker had prospered after nearly five years of independence

following an management buyout from the now defunct Corporate

Communications Group in 1992.



But in July, it was bought by the Bozell international advertising and

marketing services group, and now finds itself a sister company to UK ad

agency Delaney Fletcher Bozell.



Nan Williams, managing director at Charles Barker, says that Bozell

believes in offering integrated advertising and PR services to clients

in the US.



Charles Barker will attempt to replicate this by working with its UK ad

agency sister company Delaney Fletcher Bozell.



’We have already won joint business with Delaney Fletcher Bozell to

handle a campaign for the Teacher Training Agency,’ says Williams.

Charles Barker also expects to be working with DFB on a number of

unspecified healthcare product campaigns in the near future.



But Quentin Bell is not convinced that the logistics of co-ordinating an

integrated marketing campaign is improved simply because agencies are

owned by the same parent company.



’Ad agencies argue that things can be co-ordinated better across

agencies that are all under the same roof - but how often are they

actually working together even if they are under the same roof?’ he

asks.



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