Advertisements
 

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.

Advertisements

£3bn Aegis deal will test Dentsu’s mettle

July 13, 2012

Cynics might say that £3.2bn – cash – is an awful lot to pay for digital competence and a superior market rating. And they have a point. Would Dentsu ever have planned such an audacious and costly coup as the acquisition of Aegis Group had the Japanese advertising group earlier succeeded in its seemingly knock-out offers for Razorfish and, later, AKQA? It’s subjunctive history: we’ll never know.

Aegis chief executive Jerry Buhlmann and Dentsu president Tadashi Ishii: Firm friends?

The cynics are, in any case, substantially unfair. There’s much more to the Aegis acquisition than digital. This is arguably the transformative deal of the decade. It’s as if there has been a tectonic plate shift in marketing services, revealing a series of minor preceding tremors as clearly apparent elements in a wider pattern.

These minor tremors include the foundation of a much stronger, and more independent, operating unit in the US – Dentsu North America – under the direction of Tim Andree; Andree’s earlier acquisition of some of America’s sharpest shops, McGarryBowen, Attik, and 360i; the harnessing of McGarryBowen to Dentsu’s embryonic European network, led by former WPP executive Jim Kelly; and, not least, Dentsu’ decision to pull out of its unsuccessful strategic alliance with Publicis Groupe, cashing £535m in the process.

Andree, now gone global as senior vice-president at Dentsu and no doubt a strategic architect of the acquisition, has admitted that the £535m was “helpful in this deal” – coded language referring to the cash pile making it possible at this time. But something of the sort has needed to happen for a long time if Dentsu were not to be stranded in its idiosyncratic role as a one-country wonder, with 80% of global earnings still accounted for by overwhelming dominance in the Japanese market.

There are lessons in failure, and the Japanese management of Dentsu finally seem to have learned them. Neither strategic alliances, meaning stakes of about 20% in rival but complementary marketing services companies, nor the occasional one-off acquisition, such as Collett Dickenson Pearce all those years ago, suffice  for players in a global market. They needed to delegate more, and yet be more masterful in their acquisition strategy.

The delegation came in the realisation that people like Andree, John McGarry and Kelly would know more about how Western advertising culture actually functioned than Tokyo Central would ever know.

The more masterful acquisition strategy came from the realisation that opportunities for global expansion were rapidly narrowing, and if they wanted a suitable counterweight elsewhere in the world, they would have to put aside an institutional aversion to big takeovers and get the cheque-book out.

That’s why £3.2bn to buy the Aegis Group – 18 times prospective earnings compared with a market average of about 13 – is not too much to pay for this deal. It gives Dentsu indispensable weight as a global player: at $7bn revenues combined, close competition with the Interpublic Group as the number 5 player. As a media/digital operator, it moves into the third slot, behind GroupM (WPP) and Vivaki Media (PG). And geographically, it reduces its dependence on Japan to 60%.

Over at Aegis, it’s difficult to guess whose smile is broader: that of Vincent Bolloré, 26% shareholder; Harold Mitchell, who doubles his invested capital from the sale of his business two years ago with a £112m takeaway; or Aegis chairman John Napier. Napier has had to perform a very difficult tightrope trick in the City with a monkey on his back. The monkey is Bolloré.

On the one hand, Aegis has performed extremely well in recent years, with organic growth rates defying all its bigger rivals. A cleaning-up operation, which brought Mitchell’s Australian media buying services in and off-loaded the under-performing Synovate market research business on Ipsos, improved them still further.

On the other, there was always an air of impermanence about a company as small and narrowly defined as Aegis being on the public markets. Chief executive Jerry Buhlmann knew it, Mitchell – judging from his share investment strategy –  knew it, Napier knew it and – most importantly – Vincent Bolloré knew it. Which is why he built up a stake in the first place. From the angle of Aegis’ corporate independence it is difficult to know which was worse: Bolloré Mark 1, the corporate raider stealthily engineering a boardroom takeover with a view to break-up; or Bolloré Mark 2, the disillusioned ‘strategic investor’ seeking to offload his game-changing stake at the first reasonable opportunity. Each was destabilising; neither the stuff of a good corporate narrative to wow other investors. Bolloré is now laughing all the way to his bank – £725m in pocket, representing a 50% premium on his investment. Quite what this means for the future of Havas, trailing with only $2.3bn global revenues, is of course an interesting  – but quite separate – question.

The nature of the Aegis deal – cash, and a 50% premium to the share price – makes it exceedingly unlikely that Dentsu will face any challengers for its prize. What matters now is whether it will make the deal work. The enlarged Dentsu can boast that 37% of its revenues are derived from the cutting edge, digital – a greater share than any other global marketing services group. Buhlmann has agreed to stay on until at least the end of next year, which should help the glue to set. But what then? Aegis, at nearly 40% the size of its new parent company, is by a wide margin the biggest acquisition that Dentsu is ever likely to make. That’s quite a cultural challenge.


Vincent Bolloré to pick up £53m windfall in wake of Ipsos Synovate deal

July 28, 2011

The small print in Aegis’ decision to sell its market research arm Synovate to Ipsos for £525m is easily overlooked. Vincent Bolloré, principal Aegis shareholder, will take a windfall commission of £53m.

‘Commission’? Whatever the business logic on both sides of selling Synovate to Ipsos, no deal was possible without Bolloré’s say-so, as 26.5% Aegis shareholder. We now know his price, to be extracted in the guise of a 15.5p special dividend payable to all shareholders once the deal has gone through in September.

Bolloré’s opportunistic windfall fits well with his recent self-styled image as merely a “financial” stakeholder in the media buying giant, who is theoretically ready to sell out if the price is right. But don’t be deceived. Aegis, as a pure-play media planner/buyer, is now a lot more vulnerable to a break-up bid. And Bolloré, as chairman of and 33% stakeholder in Havas, has greater strategic reason to promote one than any other potential player.

Bid speculation about Publicis Groupe and WPP, which has fueled Aegis’ share-price recently, looks wide of the mark. A senior source at WPP has dismissed a break-up bid as “pure BS”, while Maurice Lévy implicitly ruled out the idea of Publicis being a prime mover in his H1 earnings call last week (although, note his cryptic point about a “game-changing opportunity in one of our operations” in the ‘M&A’ section of this interview).

A break-up bid initiated by either party would lead to severe regulatory problems. Havas, on the other hand, has every reason to snap up a global media buying operation if the price is right. The perceived problem is that Bolloré does not have the financial resources to act on his own.

That’s not to say he could not, or would not, collaborate in a carve-up. After he has picked up his windfall, of course.


Is Ipsos poised to buy Synovate from Aegis for €550m?

May 20, 2011

A rather interesting rumour is doing the rounds of the City. And it is this: Aegis, the media buying group, is about to divest its market research operation, Synovate, for a princely €550m (£481m). The lucky recipient? Paris-based global market research empire Ipsos.

While I have no idea whether any deal will go through, let’s say it’s not a surprise that the two parties should be talking. After all, we’ve been here before – or at least, somewhere very nearby.

Back in 2009, Aegis launched a formal strategic review to determine whether or not to sell Synovate. At the time, GfK was felt to be the most likely buyer. GfK – privately held but the world’s fourth largest MR group even so – was still smarting after it came off second best to WPP in the acrimonious £1.1bn bid battle for Taylor Nelson Sofres.

But it might just as well have been Ipsos, the fifth largest, that was doing the talking. Both MR groups are in the grip of the same strategic imperative: they need to grow bigger in the wake of the 2008 TNS deal, which catapulted WPP to near top position in the world market research league table, just behind Nielsen. The consolidation question is not a ‘whether’ but a ‘when’.

What’s more we know the Ipsos management team admires Synovate and believes it would be a good fit. Don’t just take my word for it. In late 2005 Ipsos’ chairman and chief executive Didier Truchot publicly described Synovate as “a very nice and dynamic organisation.”  Of course, he didn’t go so far as to say he would actually buy it. Then again, he didn’t say he wouldn’t. He merely pointed out that it was “a little too early” to entertain such a possibility.

Truchot was at it again in 2009, when announcing a robust set of results for the previous year: he danced around the idea of buying Synovate without actually saying it.

Perhaps five-and-a-half years has proved long enough to mature his plan.

All of which does little to shed light on Aegis’ motives for selling the business, if that is what it is doing.

Admittedly, the market research division is currently an underperformer. In the latest, Quarter 1, financial results, the Media division turned in an impressive 10.1% improvement in sales, well ahead of the 7% analysts had been expecting. Synovate, on the other hand, undershot, if only by a small amount.

Furthermore, divestment would provide more ammunition in the war-chest. Aegis chief executive Jerry Buhlmann has already embarked on a strategy of shoring up Aegis’ position as a pure-player global media buyer with the £200m acquisition of Mitchell Communications.

But there is a wild card in all of this. What of 27% Aegis stakeholder Vincent Bolloré? Despite his very public disavowals of any further interest in a takeover, Aegis would surely become more, not less, tempting as a target. After all, what Havas – of which he is president and the principal shareholder – most needs is a more effective media buying operation.

UPDATE 6/6/11: Evidently the rumour was true: Aegis has just confirmed it. What matters, now the veil of secrecy has been stripped from the talks, is whether Ipsos is allowed a clear run at the acquisition. Or will others, such as Publicis Groupe, barge in with better terms? Anyone interested in the financials (Ipsos is about twice the size of Synovate) might care to look at Bob Willott’s newsletter on the subject.


Havas’ David Jones – the man who would be king

March 9, 2011

What a week to be away. Mark Lund, chief executive of the COI, announces he is quitting after only two years (it’s usually a five-year contract) to return to the private sector. There could be no bleaker verdict on the outlook for public-sector marcomms expenditure in the foreseeable future.

Meantime, David Jones (on the right) has emerged as group CEO of Havas’ global operations. Jones takes over from Fernando Rodes, who has held the post since billionaire financier and industrialist Vincent Bolloré first became chairman and principal shareholder (35%) of Havas.

At first sight, the management shake-up comes as a complete surprise, with Rodes unexpectedly announcing his semi-retirement at a board meeting yesterday. In fact, the accompanying restructure has all the hallmarks of a carefully stage-managed event. It should also be noted that Rodes’ resignation comes precisely five years after he was installed in 2006.

Rodes has been competent rather than outstanding at the Havas helm, and seems to have been feeling the pressure from Bolloré. Global expansion has been hesitant and Havas’ recent set of annual results show solid rather than spectacular signs of recovery. They certainly lag the performance of the really big hitters such as WPP and Omnicom.

Rodes is a complex and somewhat enigmatic figure. He holds many trump cards: urbane, an accomplished linguist, well plugged into the Franco-Iberian business community, he is also a key player in MPG – a media planning/buying specialist set up by his father Leopold, and now a strategic component of Havas. But the appeal (like MPG’s) is regional rather than global. And he comes across as a somewhat reluctant leader.

Jones, whose middle name is ‘Vitality’, can be accused of no such reticence. For some time, he has been the obvious leader-in-waiting, as head of EuroRSCG Worldwide and latterly Havas Worldwide (meaning all of Havas’ global advertising operations). Which is where the recent growth, particularly in North America, has really been happening.

To these responsibilities will now be added MPG, plus other media buying units such as Arena. Note, however, that Jones’ own power-base remains intact: he will continue to be CEO of EuroRSCG.

He’s a shoo-in in other respects, too. Fluent in three languages (English, French and German), Jones has been an indefatigable performer on the world stage ever since he rose to prominence at Havas. He is a natural brand ambassador.

We should not underestimate his achievement, however. At 44, he is the youngest-ever CEO of a premier league advertising and marketing services group. He is also that extraordinarily rare phenomenon, a Brit in charge of one of France’s most cherished companies.

No pressure then, though I doubt he’ll show it.


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).


Is Bolloré limbering up for a new tilt at Aegis?

September 28, 2010

Wouldn’t it be a shock if Vincent Bolloré, corporate raider, chairman of Havas and long-time would-be nemesis of Aegis, were finally to deliver his knock-out blow just when the media buying, digital and research group was least expecting it?

But he’d never do that would he, not now? Most informed commentators believe he missed his golden opportunity 18 months ago when Aegis had lost a third of its market value and was lurching rudderless after the incoming chairman, John Napier, fired group chief executive Robert Lerwill. Things are very different now, with Jerry Buhlman installed as ceo and actively engaged in an aggressive acquisitions policy that has successfully targeted Australian media buyer Mitchell Communications. The share price – an anaemic 75p 18 months ago – has now regained a lot of its former lustre, hovering around 123p.

So Bolloré, who owns 29.9% of Aegis, yet has failed five times to get two of his own directors on the board, would be mad to strike now – wouldn’t he? That’s certainly the impression he’s been cultivating with carefully placed interviews in France’s leading daily Le Figaro and the Financial Times. In the latter, the chairman and 33% owner of Havas tells us that the global advertising and media buying network is now poised to make a series of acquisitions but, he cautions: “It doesn’t mean we want to make one big shot but some different acquisitions in different countries.”

Really? What commentators seem to forget is that Havas itself was in no fit state to exploit Aegis’ weakness 18 months ago. It’s far better primed now, with up to €2bn (£1.7bn) in cash and loans available to it, and a much fitter share price to boot. Bolloré has close connections with Italy’s biggest publicly traded investment bank Mediobanca, of which he is a 5% shareholder.

Aegis is capitalised at about £1.47bn. A bid mixing Havas shares with substantial cash to sweeten Aegis’ extraordinarily loyal shareholders would be the way ahead.

Let’s see whether  – in the coming months – Bolloré has the courage to take it.


%d bloggers like this: