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Max, Dan, Jerry – 2012’s out-performers

December 14, 2012

League tables of achievement are as commonplace as turkeys right now. Why burden you with another one? Well, I’ve been asked to – by the good folk at More About Advertising. So:

Ad of the Year. Yes, I liked BBH’s “The 3 Little Pigs” and Creative Artist Agency’s Cannes Chipotle winner. Also, Del Campo Nazca Saatchi & Saatchi’s work for – of all improbable B2C clients – air-conditioning specialist BGH. Of which this, directed by Juan Cabral, is the latest instance:

As MAA’s Stephen Foster puts it – “bleakly comic”.

My favourite, though, was “Follow the Frog”, a quirky satire of the desk-bound yuppie eco-warrior fantasising about making the World A Better Place. Writer, director, copywriter, art director is Max Joseph – clearly a bit of an Orson Welles in the making. The commercial was produced by Wander Films, a creative boutique in Los Angeles. The moral? You don’t need to go to the ends of the earth to save the rainforest. Just Follow the Frog by buying kitemark-certified Rainforest Alliance products. They’ll do all the ethical heavy-lifting for you: sustain the forests, uphold socially equitable farming methods, and guarantee that what you buy is economically viable:

It’s long – but isn’t nearly everything these days? The measure of the made-for-internet film is not its length, but how well it sustains our interest. On this criterion Follow the Frog succeeds very well. It’s got a good tale to tell, is directed with panache and enlivened by bold use of graphics. Oh, and it uses gentle humour to camouflage the piety of its evangelical message. Yes “Siri”, it get’s my vote.

Agency of the Year. I won’t beat about the bush: it’s got to be Wieden & Kennedy. International networks frequently produce isolated instances of brilliance (Del Campo being an example within the Saatchi organisation). Exceptional work, simultaneously executed on a number of fronts, is another matter. To take an investment analogy, W&K is a momentum stock outperforming in all its main markets. Whether that’s Clint fronting for Chrysler at the Super Bowl:

… London winning the £110m Tesco account – but also producing some of the most interesting creative work since “Grrr”:

Or Amsterdam’s slick spoof for the latest James Bond film, which neatly segues into its current Heineken campaign:

Person of the Year. Tempting to mention the name of Joel Ewanick, isn’t it? No one can be said to have made a bigger splash in the world of marketing over the past year. Arguably, however, the now-dismissed chief marketing officer of General Motors made headlines for all the wrong reasons. A change agent he certainly was, but were any of his changes for the good? And what sort of permanence will they have? We hacks miss him, but I suspect the wider marketing community will not.

Jerry BuhlmannInstead of anti-hero, therefore, I’ve plumped for a gritty go-getter: marketing services’ answer to Daniel Craig. Like Craig, he certainly wouldn’t be everyone’s first choice as the archetypal smooth operator. But his coolness under fire cannot be doubted. Step forward Jerry Buhlmann, chief executive of Aegis Group plc. If there is one thing archetypal about Jerry, it’s that he’s a self-made media man. He started off in the “five to one” slot, in other words the lowest of the low in the full-service agency hierarchy, at Young & Rubicam in 1980. Nine years later, he was setting up his his own media-buying outfit BBJ – along with ultimately less successful Nick Brien and the downright obscure Colin Jelfs. BBJ – nowadays Vizeum – though successful (it handled for example the BMW account) was originally a “second-string” shop for conflicted WCRS media. Buhlmann’s career really took off when WCRS’s Peter Scott had the inspired idea of acquiring Carat – Europe’s largest media buyer – and floating off the combined operation as a separate stock market entity, rechristened Aegis. Buhlmann and his company were soon swallowed up by the independent media specialist, which offered him much wider career opportunities.

But was he a man capable of capitalising on them? While no one has ever doubted Buhlmann’s single-minded ambition to succeed, a lot have wondered whether he had the competence to do so. Yes, he had a mind like a calculator and razor-sharp commercial acumen, but where, oh where, were those human skills no less essential for making it to the top of the corporate pile? There was much mirth in the senior reaches of the media industry when Buhlmann got his first big break as head of Aegis Media EMEA in 2003. “It’s like William Hague trying to emulate Margaret Thatcher” was a typical response to his promotion. Then, as later, Buhlmann’s critics completely underestimated his ability to learn on the job. When he became group chief executive in 2010, the reception was scarcely less friendly. The master of ‘focus’ and ‘detail’ was incapable of taking the broader view vital to successfully running a publicly-quoted company, it was said. And then there was Jerry’s far-from-diplomatic demeanour: how long before he rubbed the City up the wrong way and had to be dispensed with?

It wasn’t as if Aegis was an easy company to run, either. As a (near) pure-bred media specialist, it was susceptible to squalls in the media every time the inevitable financial scandal broke. Inevitable, because media buying and peculation are bedfellows and peculation distorts financial performance – meaning in Aegis’ case it had to resort to highly public mea culpas every now and then. Other major media outfits, by contrast, have been able to rely on defence in depth from the much bigger marketing services organisations to which they belong.

Not only that, Aegis’s card was marked as a public company. For years, it laboured under the strain of being a takeover or break-up target. The strain became nightmarish when Vincent Bolloré, the shareholder from hell, took a strategic stake in Aegis and began engineering a series of boardroom coups.

Some of the credit for Aegis’ eventual soft-landing – a 50%-premium, £3.2bn cash deal with Dentsu, sealed last June  – must go to Aegis chairman John Napier. But that still leaves a lot owing to Buhlmann himself. Not only did he keep all the plates spinning in difficult circumstances, he also demonstrated a strategic clarity which eluded his predecessors. He ruthlessly pruned the company of its lower-margin research operation (by disposing of Synovate to Ipsos), but at the same time bolstered its pure-play media-buying profile with the geographical add-on of Mitchell Communications.

Not a bad result, all in all, for the man once dubbed the king of the second-string.

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UK marketing managers should sip from the glass half-full

April 29, 2011

Curiouser and curiouser. Almost all the big battalions in marketing services have now reported their Quarter One financial results. Without exception they mirror the upbeat performance curve of Omnicom, the first out last week. Which is in bizarre contra-distinction to the gloomy outpouring of the Bellwether Report I commented on earlier.

No need for too much fact-grubbing here. Just look at the organic growth of the big agency groups. Publicis Groupe (6.5%), Havas (6.8%) and WPP (6.7%) easily coasted past Omnicom’s already impressive 5.2% global figure. Only Interpublic lagged – and even so achieved a creditable upturn of nearly 5%.

So what, you say? All this shows is a startling outperformance in emerging economies such as China, India and those of Latin America. Which is concealing lacklustre results in doldrums Europe – and particularly the UK.

Not exactly. True, the emerging markets are flattering overall performance. But when you look at the UK, you wouldn’t believe the economy is flat-lining at all. While no one else has achieved Omnicom’s astonishing UK organic growth rate of 9%, the general results are pretty impressive. At the bottom were Publicis, with 2.4%, and Havas (2.5%). Much more significant was WPP’s performance. WPP, now the world’s largest marketing services group, still derives 12% of its global revenue from the UK and managed to extract 7.7% organic growth. What’s more WPP chief Sir Martin Sorrell is cautiously optimistic about the prospects for 2011 and 2012. A more reliable index of Sorrell’s growing confidence is the fact that he has slipped the self-imposed £100m corset off WPP acquisitions; although he does caution the next one will “only” be about £200m. That is, the size of last year’s biggest – Mitchell Communications, which was acquired by Aegis Group.

So what’s with the Bellwether’s pessimism? UK marketing managers really should sip the glass half-full. There’s every reason to suppose it won’t poison them.


Aegis Group comes a cropper over £25m client bad debt

February 22, 2011

Aegis Group, the media buying, planning and research company, is beginning to look plain unlucky. Late last year, it had to eat humble pie after the much-trumpeted £200m deal with Mitchell Communications went sour. Aegis was forced to restate Mitchell revenue figures – downwards.

Now Aegis’ Spanish subsidiary has been landed with a bad debt of £25m, which will have to be written off against the 2010 profit and loss account. The cause of this debt is one of its former Spanish clients, Nueva Rumasa. It’s an industrial conglomerate – owned by the billionaire Ruiz Mateos family – which has been in financial trouble for some time. Which is why it has gone into the Spanish version of Chapter 11, a form of protected bankruptcy.

Note the “former”. Extraordinarily, Aegis appears to have extended Nueva Rumasa 24 months’ credit. Not, you might say, the usual terms.

Aegis will publish its annual figures on March 17 and says the bad debt will have no effect on its underlying performance. It will, however, likely affect the dividend. Earnings per share will have 20% lopped off them. City analysts had been forecasting EPS of 10p per share, pre-adjustment.

UPDATE 1/03/11: Financial expert Bob Willott asks how a public company like Aegis could have allowed a £25m debt to roll up, apparently unmonitored. How indeed? Lax Spanish practices seems to be the answer. Willott calls for heads (or a head at any rate) to roll. He’s probably right to do so. But I doubt they will. There’s more on the Rumasa bad debt in Willott’s Financial Intelligence newsletter...

… and in my Marketing Week column this week.


Which agency network group will land the next big deal?

December 31, 2010

Corporately, the 2010 agency scene has been remarkable in only one respect: the absence of a big, transformative deal. Consolidation, the key underlying trend of the past decade or so, seems to have stopped in its tracks.

True, there have been some near misses. Most notably, Dentsu nearly acquired digital network AKQA for about $600m, but backed off at the last minute over fears about the excessive price, not to mention the perceived hostility of AKQA’s senior management.

Publicis Groupe, however, did not launch its much-touted (not least by me) all-shares takeover bid for a holed-below-the-waterline Interpublic Group. And Vincent Bolloré, chairman of Havas, did not conclude the longest hostile takeover bid in history by acquiring the 70% of Aegis Group he does not already own.

Symbolic of this lacklustre M&A year has been the muted activity of the sector’s most aggressive actor, WPP. Group chief Sir Martin Sorrell restricted himself to useful infilling, of which the most decorative has been the acquisition this week of Blue State Digital, the agency that helped to propel Barack Obama into the White House, and the bankrolling of Peter Mandelson’s consulting business, Global Counsel. The £100m channelled into acquisitions this year is mere pocket money compared with WPP’s last big splurge – £1.1bn spent on buying research company TNS in late 2008.

Now I know New Year crystal-gazing is a dangerous thing – not least because the wildly inaccurate predictions, which often result, come back to haunt you. But I do believe change is in the air. No, really.

One straw in the wind is Omnicom’s return to the poker table after about a decade’s absence. Chief executive John Wren has pooh-poohed suggestions that his company will seek out transformative deals of the Razorfish (Publicis) and 24/7 Real Media (WPP) kind. But he has acknowledged Omnicom’s backwardness in the digital sphere and announced a Big Leap Forward. Typically, this is to take the form of partnerships rather than outright acquisition. All of which has not stopped Omnicom from getting into intensive negotiations to acquire eCRM company Communispace for about $100m (we may know the result of these quite soon; I gather there are some tax complications). Note that Omnicom has access to $2bn of revolving credit, with the option of an extra $500m.

Nor, for all the caveats that must surround any such bid, should we expunge Publicis/IPG from the script. Publicis has been put off its stride during 2010 by a messy succession crisis, which has now been settled for the time being. If anything, IPG’s plight has worsened during that time. To add to chief executive Michael Roth’s woes (prime among them, a smouldering fire in the IPG engine room, McCann Erickson), it looks very likely that one of his principal networks, DraftFCB, will lose its $1bn signature account, SC Johnson (which it has handled for decades).

Mitchell: Deal doesn’t add up?

And let’s remember that Aegis is not off the hook, either. Probably the most significant agency deal of 2010 was Aegis’ £200m acquisition of Mitchell Communications in July. Back then it seemed a shrewd move, and not only for Harold Mitchell, the eponymous founder, who ipso facto became a 4% holder of Aegis stock. In return, Aegis reckoned it had got significant exposure to Australasia, and a form of insurance against another hostile sortie from Bolloré – even if it did pay top Australian dollar for the privilege.

I have since heard the deal wasn’t quite as margin-enhancing as Aegis chief Jerry Buhlmann would have had us believe at the time. Mitchell has now admitted that revenues are not all they were cracked up to be. At any rate, Aegis has had to reissue its circular, with certain embarrassing amendments to corporate expectations contained therein. How Bolloré must be laughing all the way to his bank (Mediobanca).


Harold Mitchell hedges his bets in shrewd £200m Aegis deal

July 29, 2010

Aegis Group’s bullish chief executive, Jerry Buhlmann, has been as good as his word. Back in March, on the coat-tails of some rather disappointing annual results, Aegis announced it was raising £175m through a convertible bond issue to “…bolt on acquisition capability.”

Now we know what he has bolted on: Mitchell Communications, Australia’s largest independent media-buying group. Actually it’s a bit more than that. Harold Mitchell, who set up the company in 1976 and still owns 30% of it, has been careful to diversify into other marketing services areas –public relations, branded entertainment, sponsorship and digital marketing among them.

There seems no reason to doubt Aegis’ boast that the acquisition is a good cultural and geographical fit, which will immensely leverage its position in Australasia. Whether the £208m deal, 60:40 in cash and shares, is as “earnings accretive” as the company makes out is another matter. At 18x earnings, it looks a wee bit pricey.

Then again, quality costs. And there may be hidden strategic wisdom in this apparent money madness. The deal will, in the short term, make it even more difficult for 29.9% shareholder Vincent Bolloré to bring to fruition what must by now be the longest-running takeover bid in corporate history. Despite Aegis’ historically low share price in recent times, Bolloré has not had the wherewithal for a coup de grace. Indeed, he seems to have been casting about for allies to help him in a break-up bid. If so, the revving tank engines will now be switched off while he considers his next move.

One important insight here is Harold Mitchell’s decision to take up all his rights in shares not plump for the cash – which has the effect of making him a 4% holder of Aegis stock. You might argue that he had little choice if he were not to appear disloyal to his new owner. Even so, a smaller amount taken out in cash would not have been unreasonable. So why has he done it? One possibility is that the wily old bird scents the inevitability of takeover. Not now, perhaps, but in the medium term. A bid premium would have to be at least 30% above the recently traded share price: better than any return made on cash taken out. He’s shrewdly hedging his bets.


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