he number of noteworthy adver
tising agency names has
decreased by two in recent
weeks as the economic slide
begins to bite hard. This figure look set to increase
as agency networks turn to mergers to pull them
clear of financial trouble.
Love, an agency brand that was on a crest of a
wave after its acquisition by the Photon Group in
2000, has been subsumed into AdPartners, while in
Brisbane independent agencies Gallery and De
Pasquale have meshed under the no-nonsense
moniker of Gallery De Pasquale.
Mergers cause understandable uncertainty for
staff and clients, but those at the centre of the lat
est link-ups feel the trend is inevitable, and does
not necessarily have to be negative.
“Times like these force people to focus,” says
Geoff Nesbitt, chief executive at AdPartners. “The
market will always turn, so this is a great time to
look at your people and your clients and come out
the other side stronger. Rationalisation is always a
good thing. Lots of good agencies have come from
two agencies coming together.
“This will give us an opportunity to re-ignite
some client relationships and it provides us with a
much stronger team. An agency is as only as good
as its offer and the people it has. You can’t get
caught up in names or brands. We could change our
name, but it would just add complexity. It’s best to
keep it simple.”
Cos Luccitti, chief executive at De Pasquale,
agrees that agency brands ultimately matter little
when compared with the substance of their offer.
“The best brands won’t survive, the best
thinkers will,” he explains.
“For us, combining forces with a like-minded
agency means we can offer clients more of an out
standing resource, insight and support. Not to
mention shared business intelligence. Everyone
needs to think commercially sharper now. As far as
mergers go, whatever shape an agency takes it’s
about staking claim to your competitive advan
tage. How you do that is up to you.”
Luccitti rejects the suggestion that more merg
ers will hamper innovation, with smaller agencies
sacrificed in order to bolster the financial per
formance of larger sister companies. “Innovation
doesn’t thrive any better or worse inside an inde
pendent agency. It lives with the people and the
ethos of any-sized entity,” he says.
Even if the right ethos is kept within the newly-
merged agency, problems can arise. Clients often
flee an agency if they feel it has changed beyond
recognition, making the cost savings of some
mergers questionable. “We will certainly see more
closures and mergers in the next year or so, with
out a shadow of a doubt,” says an agency executive,
who did not wish to be named. “The small and nim
ble agencies will be OK, but the pretenders who
are struggling will be found out. If ad spend is cut
by 10%, Clemenger won’t fall in a heap, but for
Love it’s calamitous.”
The former staffer at D’Arcy Australia when it
was merged into Publicis Groupe in 2002, adds:
“Mergers are very difficult. They are a nightmare
and rarely work. All the revenue that the four
D’Arcy brands brought Publicis disappeared
within 12 months because clients didn’t want
another agency.”
The foundations of agency/client partnerships
are often based on the personal relationships
between the two factions. Agencies that merge
purely for financial reasons, jettisoning staff that
have strong bonds with clients, can end up losing
accounts. “If you’re merging just for some short-
term cost, you’re doing it for the wrong reason,”
says Nesbitt. “You’ve got to do it to gain a stronger
team. If not, then why merge? You have to do it to
build a springboard for the business.”
Colin Wilson-Brown, principal of consultancy
The Clinic, has previously dealt with the fallout of
clients dissatisfied by agency mergers.
“I have talked to clients who have seen mergers
as the opportune time to hold a pitch,” he says.
“Most clients are prepared to give the new agency
a go, unless they have some personal issue with
the new business or its CEO. As long as the key
people stay on the account, it gives the agency a
chance (of retaining the business).
“But some clients just don’t fit with a newly-
merged agency. The motivation for agencies to
merge is cost driven, which is fine for them, but
they need to sell the changes to the client and
offer a clear vision of how the change will
benefit them.”
Luccitti adds: “Fundamentally, clients want cer
tainty. Clients need to be treated as if they are
part of the merger deal. It affects them too.
“You don’t want to give them any reason to
think; ‘this is all a bit too hard so maybe this is my
time to look at another agency’.”
So what will the agency landscape look like
once the economic downturn eventually draws to
an end? “I can’t say for sure if there will be fewer
agencies,” says Luccitti. “But I think current agency
sizes will differ.
“I have a quote stuck on my wall by Warren
Buffet that reads: ‘Be fearful when others are
greedy. But be greedy when others are fearful.’
“I think a few smart, greedy agency people are
going to take advantage of the downturn. The ones
that sit still and do nothing will be run over.”
