Agency mergers and acquisitions and why they fail
With the announcement that Scott Whybin’s name had been dropped from the shingle of the company he founded 20 years ago, Whybin TBWA, Wayne Wood talks about why so many agency mergers and acquisitions fail..
The mergers and acquisitions game in agency-land is strewn with failures, so many local agency brands in the past have disappeared along with their billings and revenue.
Multinationals take over local agencies with the mistaken belief their brand is more powerful than the one they are acquiring. The reason for mergers and acquisitions is:
1. the acquiring agency’s brand is failing, and,
2. they need new blood (talent) to reinvigorate a tired company.
They (the acquirer) also require local clients who are far more profitable than the multi-national clients, where some brain surgeon (usually in the USA) has negotiated an unsustainable income level for accounts outside the headquarter country (usually a finance director who has little understanding of business outside of their office/country, focusing on their office profitability, at the expense of all other offices, usually negotiating a smaller % return on the thousands of millions of dollars in the headquarter country).
Agree whole-heartedly, Wayne; you know what you’re talking about. And so you should: several of the agencies on your list are ones that you have sold to the multinationals.
Another example was the Y & R takeover of Mattingly. A complete cock up where neither Mattingly clients or staff could stomach the
Y & R culture which was toxic compared to Mattingly’s. The grey men in grey suits were completely unsuited to Mattingly’s retail energy, the straight forward management style and the honest client relationships. Those responsible at Y & R left, the clients left, and a great agency was gutted.
I was there. That’s what happened.
de Pasquale never merged with BCM Partnership. They merged with Clemenger BBDO Brisbane. BCM Partnership is still operating and independent.
Another Brisbane shop to add to the list is is independent Junior that STW / WPP subsumed to make Ogilvy Brisbane.
Just ask Accenture how the Reactive acquisition went for them. Only person hanging on is Tim O waiting for his payout.
John Bevins was a closure rather than a merger/acquisition, wasn’t it?
Hi JaySee,
Indeed, when John retired he decided to close the agency rather then sell off his name. The farewell was a sad day indeed given the universal esteem John is held in.
Wayne included the agency on the list as an example of a name that no longer exists, albeit not through merger or acquisition.
Cheers,
Simon – Advertising & Marketing Editor
Not to forget John Singleton Advertising – wasn’t that an Australian takeover of a multi-national…. The multi-national won in the end though
In digital specific design / creative agencies we’ve lost stacks…
Visual Jazz
DT
Millipede
Reactive
Simplicit
Stamford
Sputnik
Next Digital
SOAP
etc…
None have been the same post merger.
Wayne, I wholeheartedly agree, having watched this sad cycle for more than forty years.
The ‘clash of cultures’ issue, reminds me of the Chiat/Day takeover of Mojo.
Chiat/Day’s Christmas card that year featured the sheet music for ‘Jingle Bells’ with the word ‘jingle’ blanked out. Inside the card it read “Merry Christmas, from the agency that’s never written a jingle”.
You could just tell that one was going to work out well …
It takes two to tango.
As an independent, the owners / Executive Team do have a choice as to whether they decide to sell or not.
And in a material world, the rationale for so doing is rarely about protecting the people employed …although the ‘there’s now a world of opportunity for you’ promise often gets airtime.
We agree with the core reasons cited for mergers failing …but surely the blame needs to be shared.
Oh, and by the way …PigsCanFlyToo!!