Owner of Burson-Marsteller Files SEC Intention for IPO

Burson-Marsteller's parent company has failed to reap profits for the past two years, prompting its filing for an initial public offering to raise $350 million. The move, sources tell PR NEWS, will no doubt make the PR industry more competitive and allow BM to extend its brands through acquisitions.

In documents filed with the Securities Exchange Commission, Young & Rubicam reveals that it will sell off closely held shares to reduce its debts.

"If I were the CEO of one of the other major PR agencies, I'd probably send over a bottle of congratulatory champagne and then tell my staff, 'Things are definitely going to heat up,' " says Richard Weiner, a senior consultant to Porter Novelli, New York. The pressure of shareholder scrutiny of Y&R is likely to affect BM's bottom line because the company's business decisions and profits will be watched by investors.

Because of SEC requirements, Y&R and BM aren't disclosing particulars about the announcement, which was filed Feb. 26. The date of the IPO has yet to be disclosed.

BM: To Be More Accountable

BM, which reportedly generated about $250 million in revenue last year, is just one of several businesses Y&R owns, including its namesake Y&R Advertising and Cohn & Wolfe, Atlanta, another PR powerhouse.

Fast Facts About Y&R Headquarters: 285 Madison Avenue New York, N.Y. 10017 Phone: 212/210-3000 Y&R CEO: Peter A. Georgescu - 1997 Salary: $950,000; 1997 Bonus: $598,000 Y&R's 1997 Net Loss: $23.9 million Business Profile: Clients include AT&T, Citibank and Philip Morris and it's credited with crafting the now-famous "Be All That You Can Be" slogan for the Army. Burson-Marsteller CEO: Thomas D. Bell Jr. - 1997 Salary: $575,000; 1997 Bonus: $168,750

Y&R has owned BM since the 1970s, a phenomenon that has been analyzed in the communications industry in two very divergent ways. Some have lauded Y&R for allowing BM to operate independently, but purists believe that bringing a PR operation into the fold of an advertising holding company puts PR under advertising's influence.

"When you're part of a big network like this, advertising will naturally come first," Edelman Chairman and CEO Daniel Edelman tells PR NEWS.

"It's a painful thing for me to watch - all these PR agencies coming under the advertising umbrella," Edelman says. "And [being owned by a public company that answerable to shareholdes] will just be a little more rigid for BM in terms of how it's structured and how it reports and manages it earnings."

BM's Piece of the PR Pie

BM now joins a maturing theater of other PR networks owned by publicly held companies - the most lucrative of late is Omnicom, which owns Porter Novelli and Ketchum and last year sealed a deal to make Fleishman-Hillard the newest member of its conglomerate.

Other publicly-held PR owners include:

WPP, the London-based venture headed by business zealot Martin Sorrell, who also owns Ogivly PR Worldwide and Hill & Knowlton. H&K is undergoing a metamorphosis as it restructures its business with the growing trend of pulling in staffers from various regions to work on accounts according to a practice-based structure;

The Interpublic Group of Companies, New York which owns McCann-Erickson and has given acquiree principal Larry Weber (who heads The Weber Group) the nod to buy up other businesses globally; and

Shandwick, London, which is basing its future, in part, on interactive alliances. Clients include Microsoft, Coca-Cola and Whirpool. It owns Golin/Harris.

BM had just shuffled out of the media limelight in connection with firing Bob Turner, chief financial officer of BM's Asia-Pacific officer (see PRN 12/15/97).

Turner allegedly padded the books so that it appeared that operating profit for that area was several million dollars higher. The discrepancy was discovered during a routine audit by Y&R. (Y&R, 212/210-3165; Richard Weiner, 212/601-8000; Daniel Edelman, 312/240-2600)

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