The bottom line of Carat’s $3bn General Motors win – no profit for 2 years

February 19, 2012

Say what you like about Joel Ewanick, General Motors’ global marketing supremo, he knows how to drive a financial deal.

The terms on which he vested Carat with the consolidated $3bn global media planning and buying account (minus BRIC countries Brazil, India and China) are now beginning to emerge.

And do they squeak. If what I hear is right, Carat – a subsidiary of Aegis Group – will not receive any profit on the account, which it recently wrested from Publicis Groupe’s Starcom operation, for a full 2 years. GM has agreed to pay no more than labour costs during that period. What’s more, it’s not going to part with a dime before Carat North America, which is handling the new business, is fully staffed up. Formally, Carat takes on that business (it already handles the $600m European account) in June this year.

Not surprisingly, making the arithmetic add up is causing Carat a few headaches. And not just Carat. Starcom has between 230-250 full-time staff running the North American business (the bulk, in global terms). Carat apparently expects to carry out the same tasks with a full-time complement of 175, or about three-quarters of the Starcom team. Starcom’s Detroit media folk, many of whom will have been hoping for continuity of employment through taking the Carat shilling, must now feel as if they are being poured from a quart- into a pint-pot.

So, when we hear Aegis Media Americas CEO Nigel Morris saying of the Carat win: “This is a defining moment for our business and the market. We have designed our organization for convergence and globalization. We have a clearly differentiated operating model that is focused on reinventing the way we work with our clients and their brands. From the outset it was evident that the GM team was looking for a transformative approach with innovation at the core,”  – we now know exactly what he means.

Necessity is, after all, the mother of invention.

For sure, the $3bn account is a totemic win for Aegis – going well beyond its immediate financial calculus; every prospective client likes a winner. But Carat is going to be pedalling hard all the way up the hill to make this deal work.

Maxus wrests £75m BT media account from Starcom

February 17, 2010

Starcom has just lost the BT media account – probably its biggest in the UK outside Procter & Gamble and worth about £75m in billings – to Maxus, a subsidiary of GroupM.

The account has been something of a grudge match between media buying agencies owned by Publicis Groupe and WPP respectively. In a see-saw sequence of events, Starcom retained BT in a difficult pitch against Mediaedge:cia in late 2007, only to cede it to its adversary now.

Maxus, formerly BJK&E, is run  by MindShare UK’s old boss, Kelly Clark. I shall say nothing about fee negotiation, nor ‘Dutch auctions’, as I have little insight into the internal machinations involved in acquiring or losing this account. I do know, however, that Nick Theakstone and his UK team at GroupM, the nerve centre overseeing WPP’s media planning/buying agencies, spent over a year teeing this account up for Maxus. Suffice to note that BT is a big feather in the cap of whoever holds it.

GroupM is on something of a roll at the moment, having just won the long-running pitch for £250m-worth of consolidated media at COI and the £500m worldwide Bayer business.

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