Madison Avenue turns its attention to all the mergers it's involved in
Madison Avenue is caught up in a dizzying whirl of acquisitions, buyouts, and mergers. Doyle Dane Bernbach, one of the largest international advertising agencies, announced somewhat enigmatically this week that it was ``engaging in business consolidation discussions involving an exchange of securities'' -- a statement many take to mean it is holding merger discussions.
It is only the latest in a series of big mergers on Madison Avenue this year.
Saatchi & Saatchi, the London-based advertising conglomerate which for the last four years has been scooping up big American ad shops, swooped down again last week to buy Backer & Spielvogel for $50 million in cash and many millions more in deferred payments to the principals.
In another headline event, Foote, Cone & Belding Communications merged with Leber Katz Partners, in what many observers were calling a marriage of convenience. FCB has offices around the world, which KLP is lacking, while LKP offers its new partner more than enough billings to offset FCB's account losses over the last year.
Hard bargaining is being conducted by Marketing Corporation of America (MCA) in its acquisition of Ally & Gargano. The two parties have moved behind closed doors to iron out the details.
Mergers are, of course, no more new to advertising agencies than they are to the commercial empires so closely monitored by Wall Street. In fact, some of the oldest and best-known ad shops, such as BBDO International (once Batten, Barton, Durstine & Osborn) and Young & Rubicam, represent merged ventures.
In the 1950s and '60s, Marion Harper, using his McCann-Erickson Agency as a base, formed the Interpublic Group, the first of the modern, worldwide, publicly held communications conglomerates.
Interestingly, Carl Spielvogel, one of the founders of Backer & Spielvogel and its chairman and chief executive officer, spent his early days in advertising at McCann-Erickson, where he helped Mr. Harper build the Interpublic empire.
According to one report, earlier this year Mr. Spielvogel went on a business trip to London for one of his clients. While there, he requested a meeting with the well-known art collector Charles Saatchi, one of the founders of Saatchi & Saatchi (S&S), to enlist his aid on behalf of New York's Metropolitan Museum of Art, another of Spielvogel's interests.
While they were talking, Maurice, the other Saatchi brother, joined the meeting, and Spielvogel returned home with the initial purchase offer from the Saatchis.
If mergers are not new to Madison Avenue, however, the rate at which they are occurring these days is. Since many of the agencies involved are publicly held, Wall Street is showing a particular interest.
Many Madison Avenue executives privately profess to being unsure as to where the merger path is leading and what its ultimate effect will be on the quality of advertising produced and the kind of service offered to clients. Others say it simply had to happen as a reaction to all the merger activity among the ad shops' clients.
Foote, Cone & Belding, which will now become FCB/Leber Katz Partners, is itself the object of a takeover attempt because of a rich cash horde of some $125 million. Shamrock Holdings, a California-based investment company controlled by Roy E. Disney, is reported to be buying up FCB's shares and now owns nearly 10 percent.
In many of the mergers, the apparent motivation is a need to go international, as American-based agencies scramble to serve worldwide markets. But local advertising agencies will have to move fast if they want to match the pace set by the Saatchi brothers of London.
On the same day they announced their purchase of Backer & Spielvogel, they went public in London with a new rights issue of 57.6 million shares. This bold move netted them more than $600 million, which S&S announced would be used to acquire more agencies.
The Saatchi rights issue is more than the entire London market digested during the first quarter of 1986, and the financial press there crowned Saatchi ``undisputed winner for corporate cheek.''
Whatever else, you can buy a lot of very big communications companies for that kind of money.