Stripped of all your finest assets

While only 12 months ago there were still whispers about a UK recession, fortunes seem to have reversed dramatically. A year on and those fears of an economic slump are a distant memory, only to be replaced by another phenomenon with equally chilling possibilities for many designers. Whether it’s merger, takeover, or acquisition, the buying cycle is upon us once again.

In the wake of the Brand Union’s acquisition by WPP Group (DW 15 October), last month’s merger of MetaDesign London and Swedish digital media group Icon Medialab (DW 7 January) could spell the dawn of a new era of merger activity, until now dominated by traditional global communications groups anxious to offer a full range of client services.

The boom times may have returned, but behind the friendly talk of merger lurks the spectre of acquisition. As surely as the technology sector has spurred much of the recent global economic growth, its newly established giants such as Icon Medialab are beginning to flex their muscles in a manner suited to WPP or Omnicom. But will groups like Icon, US Web and Sapient become the new predators of the design sector, or can they genuinely claim to be the white knights of the design consultancies they might acquire?

That oh so golden source, design industry rumour, suggests that virtually all the premier privately-owned design consultancies with a strong foothold in the digital camp have been approached in the last six months by digital media conglomerates from both the US and Europe. Their motive is merger in the broadest sense of the word.

“It’s gone crazy,” says Richard Watson, managing director of client advisory group Global Design Register. The base cause, he feels, is quite simply the recent global economic boom.

“Everyone wants to buy and broaden their offering,” he says. “There’s a big debate as to whether it’s busier than in the late 1980s, but the general feeling is its not quite there yet.

“It’s essentially about consolidation. There are a lot of design groups, set up in the mid- to late- 1980s, which want to sell up and it’s a good time to merge or acquire. But it is very much a buyer’s market – there are so many people who want to sell,” says Watson.

In his opinion, there are only a few independents left of real value to a prospective parent. This makes the handful that are worth buying all the more valuable. “Anyone will sell if the price is right, but there is hardly anybody left who is worth buying,” Watson maintains.

For consultancies which do choose the M&A avenue, there are a number of things to bear in mind. First and most importantly is the cultural fit of each side. American groups have typically very different working practices and conventions to their UK counterparts, particularly those from outside the design sector.

That said, there is still a window of opportunity for consultancies looking to partner swelling US agencies. MetaDesign London founder and creative director Tim Fendley says it is not straightforward for US groups to set up in Europe.

“US groups are going to have big problems adjusting to Europe. You really have to be European to succeed in Europe,” he says. The rules of engagement require local knowledge. Fendley says he was planning this move for six months and was engaged in talks with a number of interested merger partners, mainly from the US.

When Martin Lambie-Nairn and Glenn Tutssel sold The Brand Union to WPP, they were never even considering anything but an outright acquisition, according to Lambie-Nairn.

“We always had three main considerations for selling the group,” he explains.

“The first, I won’t deny, was that we were offered enough money for the sale. The second was that we would remain intact so that our culture was maintained. The third was that whoever we were bought by should give us the opportunity to expand and move the business forward.”

“We would not contemplate a merger… it had to be an acquisition. It’s a very painful business anyway without the complications of merging. It would be like bringing the Atlantic and the Pacific together. Besides, there’s no such thing as an equal merger,” adds Lambie-Nairn.

Fendley believes he has glimpsed the approaching tidal wave of opportunity, and goes as far as to advocate shifting the design industry’s foundations away from print, packaging, branding and so on, to the Newfoundland of interactive branding.

“The whole [design] industry is going to be turned upside down,” he predicts. “There is a massive move towards mergers.”

Merging, it seems, can afford a wealth of new branding opportunities for consultancies that are prepared to branch out into full service digital branding.

According to Fendley, the creative culture of the design profession sits design consultancies ahead of management consultancies and even advertising agencies as the new guardians of the brand, in a future where everyone is embracing new media.

1999 mergers and acquisitions

January

Enterprise IG acquires a 50 per cent stake in Hamburg consultancy Windi Winderlich

February

The Coleman Group takes a 71 per cent stake in Dutch packaging and corporate consultancy Millford-Van den Berg

April

Rodney Fitch buys back the 50 per cent stake Virgin Group held and sells the majority stake he held in Wickens Tutt Southgate

Virgin Group sells its stake in Clinic

May

Fitch is acquired by Lighthouse Global Network (formerly Lighthouse Holdings) after de-listing from the London Stock Exchange

June

RCH Design Worldwide and Lyons Marketing Communications merge

September

Hero acquires JHA with Creative Impression joining officially in mid-2000

Terence Conran joins together CD Partnership and Conran Studios to form Conran & Partners

October

WPP Group completes its acquisition of The Brand Union

Seven Interactive merges its UK and US operations

November

Conran & Partners merges with Sebastian Conran Associates

Havas Advertising merges Conran Design Group and DIA

LGN acquires Seattle design group The Leonhardt Group

WPP Group merges Clever Media and Enterprise IG

Tempus Group buys the Added Value Group, parent of Brown Inc

December

Razorfish acquires US groups TSDesign and Lee Hunt Associates

LGN acquires Arizona interiors group Associates in Architecture and Design

MetaDesign London mergers with Swedish design group Icon Medialab

The New US Buyers?