A marriage of convenience

Hannah Booth considers the motivation behind the Springpoint/ Luxon Carrà merger – is this the right economic time to be thinking about global expansion?

Last week, the Interpublic Group made good its promise to Springpoint to develop its growing international network of offices when it acquired the consultancy in April (DW 25 October).

Sister group Luxon Carrà, which has offices in Hamburg and the US, was merged into Springpoint, and will be moving into Springpoint’s new offices in London’s Primrose Hill next year.

The consultancy, provisionally called Springpoint Luxon Carrà, intends to expand its global presence quickly. Plans are afoot to open offices ‘within months’ in New York and Asia to join Springpoint’s Hong Kong office, says Springpoint Luxon Carrà chief executive Fiona Gilmore.

‘The merger will help Springpoint accelerate the growth of its international brand,’ says Rich Jernstedt, chief executive of IPG-owned public relations company Golin/ Harris International. ‘It is an attractive solution to Luxon Carrà to be a part of that,’ he adds.

Cost, it appears, was not an issue. ‘It was a strategic, rather than financial, decision,’ says Jernstedt. The merger is the final step in IPG’s restructuring after it acquired US group True North in March (DW 23 March), he adds.

However, it’s hard not to be sceptical about mergers, says Cordiant Communications Group global chief executive Paul Stead. ‘Businesses are often put together to save joint resources,’ he says.

IPG also owns FutureBrand. If the merger is designed to catapult Springpoint into the big time, as Jernstedt says, what are the implications for FutureBrand?

FutureBrand isn’t concerned about a threat. It sees [Springpoint Luxon Carrà] as a different animal and not a competitor, says FutureBrand UK chief executive Charles Trevail. Given the current business climate, he is not surprised at the merger.

There will be no conflicts with FutureBrand, according to Jernstedt. Although the two groups will sit under the IPG umbrella, they fall under different divisions and will compete for business.

Springpoint Luxon Carrà‘s international outlook mirrors IPG’s goal to establish a ‘global network of companies’, says Jernstedt. But is now a good time to look for international expansion, particularly in the US?

‘US businesses have been hit hard by recession, but we intend to start small [over there],’ says Gilmore.

Others are more forthright. ‘We are facing one of the most economically challenging times ever. Any growth is difficult,’ says Stead.

CCG’s philosophy is to build on its existing structure to maintain ‘creative excellence’, Stead says. ‘Merging can be seen as homogenising a company’s offering,’ he adds.

Some in the industry suspect Luxon Carrà was struggling to work out how to grow and the addition of Springpoint, with a Hong Kong office in tow, strengthens the consultancy considerably.

A senior industry figure says Luxon Carrà has always had ambitious expansion plans, with successful offices in San Francisco and Hamburg, but the group had reached a growth impasse.

However, merging is not always the answer, according to Omnicom’s Diversified Agency Services chief executive – Europe, Anthony Wreford.

‘A substantial proportion of mergers across any business sectors fail,’ Wreford says. Mergers are typically a defensive move, particularly among medium-sized companies, designed to enable companies A and B to become a bigger player, C, he explains.

IPG’s Advanced Marketing Services chairman and chief executive Larry Weber says when two or three companies complement each other, it usually seeks to consolidate their services.

‘Clients like working with larger groups if the quality of work is not compromised,’ Weber says.

If there are few conflicts between companies, and a merger has the potential to expand the companies’ combined global ‘footprint’, it makes sense to merge, Weber says. ‘Sometimes it works, sometimes it doesn’t.’

There are other benefits to mergers. According to Wreford, acquisitions can be expensive exercises – considerable savings can be made when two consultancies merge, including losing staff positions that are doubled up, he suggests.

Springpoint and Luxon Carrà are adamant, however, that redundancies will be ‘kept to a minimum’, says Gilmore. ‘One or two’ people will go at Springpoint, Gilmore says. It is too early to say if there will be redundancies at Luxon Carrà, says global director of corporate brand and communications, David Rowson.

Onlookers should anticipate a flurry of post-merger activity – Gilmore predicts office openings in Asia and the US immediately.

The immediate future of a newly merged company should be to ‘realise its ambitions’ as soon as possible, says Wreford. ‘The dangers of lying low initially is that people will forget about the company,’ he adds.

The timing of this merger is curious. If IPG is to be believed and it is to expand its global reach, a worse time is difficult to imagine.

Cynics would argue that the deal is all about the money, and they may be proved right.

Design consultancies within the Interpublic group of companies

FutureBrand (McCann-Erickson WorldGroup)

Jack Morton Worldwide (Advanced Marketing Services)

Springpoint/ Luxon Carrà (Advanced Marketing Services – Golin/ Harris International)

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