Saatchi ad satchel bulges anew
Seven years ago, it was a little-known London advertising company. Its claim to fame was a sleek ad campaign that helped propel Margaret Thatcher to power in the 1979 British general election. Today, with its $450 million takeover of Ted Bates Worldwide Inc., which was announced Monday, Saatchi & Saatchi has become the world's biggest ad agency.
The takeover will create a Saatchi group billing of $7.5 billion, 1 times that of the recently merged ad company of BBDO International Inc., Doyle Dane Bernbach Group Inc., and Needham Harper Worldwide Inc.
Saatchi's client list will read even more like a Who's Who of multinational companies. With Bates, Saatchi will have more than 60 of the world's largest advertisers.
But the ambition of Charles and Maurice Saatchi does not stop there. The company's aim is not only to be the largest agency in the world but to be a global market leader in other business services.
``The company's ultimate goal is to become the largest business service company in the world,'' says Peter Ainsworth, an analyst at the London stock brokerage Rowe & Pitman.
Saatchi & Saatchi's rise in recent years has been nothing short of meteoric. Its growth has been fueled by so many rapid-fire acquisitions in Europe and the United States that in some circles it has been dubbed ``Snatchit & Snatchit.''
In April, Saatchi acquired Backer & Spielvogel Inc., the 23rd-largest US agency, for an initial $50 million. To finance this and the Bates acquisition, Saatchi raised 406 million ($617 million) in April by offering new shares to existing holders.
Bates is the biggest purchase ever by Saatchi; it has led to speculation that the combined group would lose some clients because of conflicts of interest. For example, Colgate Palmolive, which is handled by Bates, may take its $100 million account elsewhere, since rival Procter & Gamble is a major Saatchi client.
Saatchi's acquisition strategy dates from 1984. Before then, it dealt primarily with advertising, becoming a major player in the US market when it acquired Compton Communications Inc. in 1982. But in the past two years it has become involved in a wide array of business services, ranging from public relations, market research, and sales promotion to corporate planning, personnel recruitment, and design and corporate identity.
``Saatchi believes that the customer should be able to go to one place to obtain a more united, coherent approach,'' Mr. Ainsworth notes.
Among other purchases, it has bought the Hay Group, an American management consultancy; Yankelovich, Skelly & White and Clancy Shulman, two US market research companies; Rowland Company, a major US public relations firm; and Siegel & Gale, a US corporate design company. Altogether, it has made a dozen acquisitions in the last 18 months.
Its pretax profits have jumped from about 107,000 in 1971 to 40.4 million last year, virtually double its profits from 1984.
But its diverse activities do not mean that Saatchi has stood still on the advertising front. In February, it linked up with Dancer Fitzgerald Sample, the 13th-largest agency in the United States -- but not by buying the company outright.
It financed a management buyout for $75 million so that Dancer could present itself as independent of Saatchi. Saatchi has the option to take over the agency at any time.
The growth of its clout in advertising came after it masterminded Mrs. Thatcher's 1979 campaign. Its success was following by a series of highly praised advertisements.
Among the most successful was a 1983 commercial for British Airways. In a science-fiction setting, it depicted the island of Manhattan coming in to land at London's Heathrow Airport. The ad was shown in 46 countries and was one of the most discussed campaigns of that year.
Such imaginative work won the company clients as varied as British Petroleum, Cadbury Schweppes, Exxon, Johnson & Johnson, Citicorp, Eastman Kodak, IBM, and British Telecom.
The Saatchi brothers have turned their extreme publicity shyness into a marketing advantage, creating a kind of mystique around the company. Charles got his start as a copywriter in various ad agencies and set up his own consulting firm before he joined his brother in 1970. Maurice runs the administrative side.
``Maurice is a businessman par excellence,'' observes Bob Willopp, who is with the Spicer & Peggler accounting firm and author of an annual ad agency profitability survey. ``He has a real love and aptitude for advertising. By comparison, he is in an industry where [good] management is not readily recognized.''
Despite the company's organization, critics contend that growth may be going too far too fast and that the Bates acquisition could prove hard to swallow. But Saatchi has made British financial circles take advertising seriously and has radically altered political advertising here.
``They translated the techniques of commercial advertising into politics,'' observes Stuart Hall, a sociology professor at London's Open University. ``But this had not been the case in Britain before. Saatchi & Saatchi began treating politicians as a form of consumer choice.''