When Omnicom, New York, announced last month that it was in the throes of a deal to buy St. Louis-based Fleishman-Hillard, the move symbolized more than a reported $100 million acquisition for this holding company and owner of New York PR giants Porter Novelli and Ketchum.
It signaled the close of a chapter for the PR industry -- the near end of major PR agency independents -- and the continued financial backing by conglomerates intent on seeing PR as a promising money maker. For instance, when Omnicom revealed publicly that it had entered into a letter of intent to acquire Fleishman-Hillard and merge it with Porter Novelli, it reported that combined sales would be about $300 million in 1997.
What is left to debate is where this PR puzzle of mammoth companies, seeking to make successful PR companies their subsidiaries, will lead; however, for now, it appears that these conglomerates aren't wiping out existing PR staffs, which is a healthy sign for the industry.
What is surfacing, however, is a kind of PR terrain that in the future will likely be dominated by small agencies with several loyal clients and large PR operations competing in an international marketplace. PR experts and entrepreneurs say that marketplace will be dominated by high-tech and healthcare PR and the burgeoning investor relations and public affairs arenas.
It is also likely that as PR is increasingly viewed as a revenue generator, the millennium will see the demise of many mid-sized PR operations -- businesses which will be hard-pressed to compete against the likes of heavyweights such as Omnicom.
"I think what spawned Ketchum Communications (which included what is now the separate entities of Ketchum PR and Ketchum Advertising) when we were acquired in June 1996 was that we knew we needed to continue to grow globally and we knew we needed to invest in technology to do that. We needed the resources a public company like Omnicom can generate," recalled Dave Drobis, chairman and CEO of Ketchum PR. "In this year alone, Ketchum PR will invest $2 million in technology (hardware, software and training)."
This new reality marks the end of major independent agencies that have sought to survive without relying on deep-pocketed holding companies.
Edelman PR, if the Omnicom/Fleishman-Hillard deal goes through, will be the remaining major independent PR firm (other than close rival Ruder Finn), according to Richard Weiner, who sold his company, Richard Weiner Inc., to BBDO advertising, part of the Omnicom Group, in 1986.
Bottom Line Concerns
The acquisitions trend started to gain momentum more than a decade ago when companies with strongholds in advertising began to look at PR. In the beginning, some buyers sought to exert more control over the PR ventures they hoped to bring into their folds, but since then that business approach seems to have waned. Now, the general practice has been to allow the newly acquired companies to operate pretty much as they did in the past, but with the core business philosophy that generating revenue is goal No.1.
And through the past few years, it's an approach that's given way to a slew of acquisitions, including these major deals;
- WPP, London, now owns Ogilvy Adams & Rinehart and Ogilvy & Mather, both based in New York, and Hill & Knowlton, New York;
- The Interpublic Group of Companies, New York, owns McCann-Erickson, New York, which bought The Weber Group in December and The Ludgate Group, London, in March;
- Cordiant, London, owns The Rowland Co., New York, a move linked to the highly publicized breakup of former owners Saatchi & Saatchi;
- Young & Rubicam, New York, owns Burson-Marsteller and Cohn & Wolfe, both based in New York; and
- Shandwick, London, owns Rogers & Cowan, Los Angeles, and Golin/Harris, Chicago.
The continued growth of PR monopolies which grew out of a trend that began in the '80s (when large advertising companies began investing in PR businesses) -- is an issue that continues to dominate the PR profession. Decades ago, the PR trade grew out of savvy entrepreneurs who realized that PR would extend beyond events planning and media courting as the public gained more access into what takes place in corporate boardrooms. But since then, there has been a blending of advertising and marketing with PR, which some insiders see as good and others see as detrimental.
"In all other key areas of PR -- public affairs, crisis communications and employee relations -- advertising doesn't play a part. Being part of an advertising conglomerate is not where we belong and it denigrates us to integrated marketing," said Daniel J. Edelman, chairman and co-CEO of Edelman Worldwide.
Edelman added that he made the decision 10 or 15 years ago to avoid selling Edelman, if possible, despite the approximate six offers he's had. (Ironically, Edelman doesn't appear to have any problem being the acquirer -- on April 24, it bought its Brazilian affiliate, VK & Associates, and acquired a stake in its Argentine affiliate, Salem-Viale & Asociados.)
"As these big PR firms are acquired, mid-level companies are going to become prime candidates for acquisitions in the future and that's often something that's hard to resist for these firms," Weiner said. He is slated to speak May 7 about the recent state of PR acquisitions at the Public Relations Society of America Counselors Academy conference at St. Pete Beach, Fla. (Dave Drobis, 212/448-4200; Dan Edelman, 312/240-2600; Richard Weiner, 212/872-8005)