PR NEWS spoke last week with Andy Hopson, president and COO of PUBLCIS Dialog. Here, he provides a connoisseur-of-the- deal's view into the world of M&As - and the preservation of a PR agency - in the era of integrated communications. PUBLICIS is based in Seattle.
In June, ad and PR firm,
EvansGroup, was acquired by PUBLICIS, a European powerhouse, listed on the French Stock Exchange, which made its name in the advertising industry. In the U.S., there are now three subsidiaries operating under the PUBLICIS umbrella: PUBLICIS, the agency which used to be known as PUBLICIS/Bloom; PUBLICIS Dialog, the brand formed out of the EvansGroup PR merger; and PUBLICIS & Hal Riney, the well-known ad shop.
PRN: Many companies don't integrate PR, direct marketing, sales promotions and graphic design. What business strategies do you employ to make that philosophy work?
Hopson: We believe that it's an attitude - that people make it work or not. We avoid the traditional problems which have typically existed in an agency environment: the lack of respect among disciplines and the turf protection. I mean that mentality that says allowing PR in the door means losing advertising budget for another area. So we train people to think "integration," and this philosophy is part of our culture. We approach everything we do with this kind of thought process.
PRN: Can you provide an example of how that works?
Hopson: Take our Seattle office, where we were awarded the Washington [state] Tourism account. When we received the RFP (request for proposal), our ad and PR teams met together from the start to develop strategy...On our organizational chart, there is a dotted line between PR and advertising, and one isn't subjugated by another. This approach is incorporated into the way we run our business.
We reward our staff financially for developing integrated marketing budgets; we base our annual bonuses on combined profits from all disciplines; we have internal training programs; and we have PR people sit in on strategic meetings, including paid media, as well as have them interact with our advertising creative minds and production, an area a lot of other agencies assign to freelancers.
That was one of the main reasons PUBLICIS was interested in the EvansGroup, for this successful integration model that we had established. And as a part of Publicis, we've been authorized by Mr. [Maurice] Levy (CEO) to expand our growth through acquisitions based on the concept that below-the-line disciplines (PR, direct-marketing, sales promotion, new media, Internet marketing and design) are all revenue functions under one management structure. Now we're about $25 million in revenue, but we'll be closer to $100 million by the end of 2000.
PRN: Without giving away company secrets, tell me what the final days were like when PUBLICIS was acquiring the EvansGroup?
Hopson: We were an employee-owned firm and because we had over 100 owners, it was a very interesting situation. Unlike most agencies, our largest shareholder didn't have more than 10 percent of the stock. So, there was a lot of discussion, a lot of input.
We had an 18-member board which made the final decision. And now, considering we're in discussions with firms we'd like to acquire, I have great empathy for what they go through. It is a very tumultuous time because you have to be very methodical about who you choose for a partner, just like in a marriage. We had been talking to them for over six months, but still it was an interesting final board meeting.
PRN: Can you share some insight into why you went with PUBLICIS?
Hopson: I will tell you that we selected them for a number of reasons - and this might provide some insight for others going through this. Philosophically, we were the same. EvansGroup was an entrepreneurial, very aggressive company that wanted to be global and get there quickly. We don't receive a lot of heavy-handed management from Paris, so we're able to remain autonomous.
It was an interesting situation in other ways. We were being acquired by a $6.5 billion, top-15 company, but PUBLICIS/Bloom wasn't yet at that status in the U.S. They were almost the same size as us, so we didn't feel as if we were being gobbled up.
Finally, we very much liked the people.
PRN: Have you lost any execs or staffers because of the acquisition?
Hopson: We've had a few board members, with the infusion of cash, retire, and we did have some modest layoffs right after the merger. The EvansGroup had about 450 employees and I believe no more than 20 or 25 were laid off. That was spread out over six offices and there wasn't any single office that was hard hit. In part, we had a situation in Dallas where we merged offices and had to transfer some accounting and billing functions to another office. That happens in mergers.
PRN: How do you keep clients in the loop when your company, their long-term partner, is being purchased by a larger network? How do you allay fears?
Hopson: You can't alarm clients by concerning them until it's something that's set for sure. But you don't send mixed messages. In our case, as soon as we were convinced it would take place, we quickly called our major clients because we knew their support was critical to the transaction. Our clients, such as Hewlett-Packard and United HealthCare, saw this as a good thing. We haven't lost a single client because of being unable to deliver a service we had in the past, but several had to resign because of conflict. It was about two or three. For instance, Americall, because of our work for Samsung.
PRN: From a business perspective, what numbers were you concerned with when considering the acquisition arrangement - salaries, access to capital, debt assumption, for example? What should others look out for?
Hopson: It depends on your business. We were looking for fair return on the value of our agency, career opportunities for our employees and resources to further our business growth, especially our global reach.
PRN: This wasn't a stock deal?
Hopson: No. And given the flurry of activity in the M&A area, we were pleasantly surprised with the financial promise of the arrangement. Today, PR companies are being valued higher than ad agencies. Generally, the multiple is five to eight times of profit. Even though PUBLICIS is publicly traded, ours was a cash transaction. We went from the philosophy that cash is king.
(Andy Hopson, 206/285-2222)
Publicis in the United States
PUBLICIS SA
Worldwide
Maurice Levy, Chairman/CEO
PUBLICIS & Hal Riney
Hal Riney, Chairman/CEO
PUBLICIS-Technology San Francisco
David Hodskins, COO
Andrew Hayman, Executive VP
PUBLICIS & Hal Riney
Scott Marshall, President
PUBLICIS & Hal Riney
San Francisco, Chicago, Atlanta, New York
PUBLICIS-Dialog
Seattle, New York, Dallas, Salt Lake City, Indianapolis, Boise
PUBLICIS United States
Robert H. Bloom, Chairman/CEO
PUBLICIS-Dialog
Jan L. Johnson, Chairman/CEO
PUBLICIS-Dialog
Andy Hopson, President/COO
PUBLICIS-Dialog San Francisco
Julio Deulofeu, President
PUBLICIS New York
Bob Kantor, Chairman/CEO
Tony DeGregorio, Pres./Chief Creative Exec.
PUBLICIS Dallas
Steve Price, Seth Werner, Co-Chairman/CEO
PUBLICIS Indianapolis
Tom Hirschauer, President
PUBLICIS Salt Lake City
Dave Thomas, President