We all see the news reports – coming thick and fast these days – announcing that yet another promotion agency has surrendered its independence in search of its destiny. Sometimes there’s a vision, while at other times it’s just an illusion. The promotion industry is, of course, littered with the bones of many a failed merger and acquisition. Veteran readers will recall FKB, KLP – the alphabet soup of marketing services conglomerates that drowned in their own broth back in the go-go 1980s.
Agencies decide to be acquired for numerous reasons, both strategic and opportunistic. We thought it would be interesting and useful to talk to principals of some recently and not-so-recently acquired shops to get first-hand perspectives on why they made the jump, how it has affected their organizations, and the lessons they have learned. Because our interest was not so much on what makes a merger go wrong as what makes it a winner, we chose to check in with a few principals who carefully thought through their decisions.
Howard Steinberg, president of Source Marketing, garnered headlines in The New York Times ad column when he sold a majority stake in his agency to Toronto-based MDC Communications in October. Why did he do it? “The best time to sell is when you don’t have to,” he says. “Business has never been better or our prospects brighter, but we wanted to force change and leverage our success for more success.”
Howard says he’s confident that being part of a larger organization won’t affect Source Marketing’s culture, that his group will remain autonomous. “The challenge is going to be avoiding process and procedure,” he says. “The only way you can control that is by simply not letting it happen. MDC respects that and supports it.”
Standing at the threshold of a new era for his agency, Howard understandably projects a honeymooner’s glow. “We feel bigger already,” he enthuses. “We are in on the ground floor of something big and we will be there when the dust settles.”
Chuck Nardizzi of BEN Promotions recently sold his agency to Earle Palmer Brown. Like Howard, Chuck says he wants his agency to be part of a larger organization that will bring to bear broader, deeper resources. “The landscape of promotions is changing and competitors are offering more resources than ever,” he observes. “Being able to get resources is critical to competing.”
Another priority for Chuck was finding an acquiring company with an operational structure similar to BEN’s. “We are nimble and lean, and we will remain so because Earle Palmer Brown’s culture is nimble and lean,” he says. “We will not institutionalize processes because that is not what they are about. Our culture won’t change.”
Happy endings are possible To get a better sense of how well Howard’s and Chuck’s optimism might hold up down the road, we called two longer-term acquirees: Wes Bray, president of Promotion Services Group, Inc., whose Market Growth Resources (MGR) was acquired in 1995 by True North; and Andrea Metzler of Highway One, acquired four years ago by The McManus Group. If what they told us is a fair indication, Howard and Chuck should be feeling pretty good about their decisions a year from now.
Wes says the alliance between MGR and True North has worked out even better than he imagined, in large measure because the parent company has allowed them to maintain their autonomy. “We’ve benefited much more from the True North relationship that we thought we would,” he says. “We’ve gotten a fair amount of business from them. We’ve also acquired some good business practices from them, but they haven’t imposed a lot of requirements on us.”
His advice for promotion agencies going through an acquisition: “Companies need to pay as much attention to the people involved as to the money and the perceived business opportunity. The True North people are good people and we trust them.” Comparing being acquired to accepting a new job, he explains: “It can be a wonderful experience, as ours has been, or it can be not such a great situation. There’s a degree of rolling the dice that goes with it.”
Andrea Metzler is similarly comfortable with the wisdom of her decision to sell. “The culture and the infrastructure of Highway One have not changed,” she reports. “It definitely turned out the way I hoped. It was a very good decision.”
Andrea adds that Highway One’s acquisition was successful because both companies had the same objectives. “Our decision was based on a meshing of corporate values,” she says. “It’s shared objectives, values and vision that create real opportunity.”
Given today’s hot market for marketing services acquisitions, the real opportunities certainly are there for the taking – at least for those with sufficient foresight to ask the right questions before signing away their destinies.