Size Matters

The world is getting smaller, we keep being told, and yet design consultancies feel they must grow in order to get their teeth into the big multinational clients. Fitch is the latest to give its expansionist aspirations a boost it has formed an agreement with US fund Lighthouse for a recommended cash offer to allow it to de-list from the Stock Exchange.

Being owned or part-owned by an international communications network is the favoured route to achieve expansion look at the former Sampson Tyrrell, Davies Baron, Newell and Sorrell, now, respectively, absorbed into Enterprise IG, FutureBrand and Interbrand empires.

The advantages of such an arrangement can be substantial a nice cash injection, overseas resources through sister offices, the security of being attached to a big brand name, and most important of all, referrals from stablemates.

Communications networks continue to be at the forefront of these mergers and acquisitions. At the end of last year ad agency Bartle Bogle Hegarty took a minority stake in The Identica Partnership, incorporating its design arm Tango into the consultancy. “Mergers and acquisitions over the longer haul is the way it’s going,” says Ian Cochrane, chairman of strategic management consultancy Ticegroup.

But it’s not enough for these ad networks just to buy up a string of groups and expect them to perform. The design interests are themselves being rebranded to reflect a unified offer within the parent company. WPP Group’s Enterprise IG model (renaming its identity businesses and thereby creating an umbrella brand), has been repeated by Interpublic Group. Its worldwide identity and packaging interests Diefenbach Elkins and The Coleman Group respectively will now all go by the name of FutureBrand, so that they can “exploit opportunities together”, says FutureBrand’s New York president and creative director Claude Salzberger.

However, being part of a conglomerate doesn’t always work. Siegel & Gale bought itself out of Saatchi & Saatchi last year, and in recent weeks all three of Virgin Group’s design interests have pulled out of the arrangement. “I can’t see very much synergy [for Wickens Tutt Southgate, Rodney Fitch & Co and Clinic] with that group at all,” says Amanda Merron, partner at accountant Willott Kingston Smith.

If all a group wants is funding, it may be better off going to a bank, says Cochrane. Wolff Olins, the only major independent identity consultancy, has opened a New York office with venture capital backing.

The market is polarising, says Cochrane, and where does this leave the smaller independents? “There will always be a role for independent players,” he says. Indeed, Merron sees this polarisation as creating a specific opportunity. “It provides a vacuum for independents to grow into the gap left,” she says. While quoted groups have to keep their eyes on hungry shareholders, independents can choose projects which allow them a little more creative freedom, she adds.

Mergers and acquisitions look set to continue, but Merron expects to see a shift in the deal set-ups, with parent companies only taking a minority stake so that owner-managers maintain a hands-on management role. Identica’s arrangement with BBH is an example.