A Madison Avenue merger sends ripples into ad world
For Madison Avenue, where the majority of world advertising dollars are concentrated, 1982 is shaping up as a big year for mergers.
So far this year there have been over a dozen buy-outs of advertising agencies. On the merger list are some of the biggest agencies headquartered in New York.
But one merger took the industry a bit by surprise this spring. Saatchi and Saatchi, London's largest and perhaps hottest ad agency, took over the much larger, well-established Compton Advertising. The result is a worldwide agency with combined billings of nearly $11/2 billion.
The merger seems to be a clear case of the tail wagging the dog.
First is the issue of size. Although Saatchi & Saatchi is big in England, its billings barely qualify it for inclusion on the list of the top 30 agencies worldwide. Compton, with over double the Saatchi billings, is secure in the No. 15 slot.
Then there's the recognition factor. Although well known for its dazzling advertising triumphs in Great Britain, the 11-year-old Saatchi & Saatchi was basically unknown on this side of the Atlantic prior to the merger. On the other hand, Compton is one of this country's old-line packaged-goods agencies, with large chunks of Procter & Gamble's advertising. Compton has long been on the merger prowl itself, having successfully acquired the Rumrill-Hoyt ad shop a few years back.
Seven years ago it was Compton that purchased a 20 percent interest in Saatchi, with a view to strengthening the relationship as time went by. But the merger that finally took place in March made news on both sides of the Atlantic. For the first time in advertising history, a British agency was buying out one of the top 15 agencies.
A close look at Saatchi & Saatchi gives a clearer picture of how this remarkable turnabout merger happened.
Charles Saatchi, later joined by his younger brother Maurice, set out to take London's advertising establishment by storm over a decade ago. ''No one in London is surprised at the Saatchi's takeover of Compton,'' says Chris Martin, a close follower of the Saatchis and the new creative director for the London office of TBWA, another worldwide advertising agency.
''From the very beginning, Charles was a top-notch writer and creative person , and some of his hard-sell car ads for Ford and his retail promotions for Selfridges department store are brilliant. But at some point - perhaps it was when Maurice joined him - they switched emphasis from creativity to growth. One thing about Charles - he knows how to handle the press and which moves to make, '' Mr. Martin emphasizes.
When queried about the prospects for this trans-Atlantic union, Mr. Martin responds without hesitation. ''It's bound to succeed because the Saatchi's have gone into the American market in a big way. If you want to make an impression on Madison Avenue, you've got to go all out like they're doing.''
The London advertising scene is dotted with American agency outposts which, like Compton in the past, have sought to take over English advertising. John Bernbach, General Manager of Doyle Dane Bernbach's London office and president of the European Advertising Association agrees with Mr. Martin's optimistic forecast for the merger. ''I think that of all the European ad agencies that have tried to take on the United States Saatchi & Saatchi has the best chance to succeed because they went in big. They didn't stand in awe of Madison Avenue and American advertising.''
Bernard Barnett, editor of Campaign, a major British advertising trade journal, has this to say about the buy-out, in which Saatchi & Saatchi paid nearly $30 million for 100 percent of the Compton stock: ''The Saatchis have carefully put together a very smooth deal with a good mesh of clients that fits together nicely.'' The list of shared clients reads like a who's who of blue-chip advertisers - Cunard, Du Pont, IBM, Nestle, Max Factor, and Procter & Gamble.
O. Milton Gossett, Compton's chairman and chief executive officer says, ''We are delighted to have found a way to bring our working relationship closer.'' Clients are reacting favorably to the news, he indicates - but how well the merged agencies work together will be the best yardstick of the deal's success.