News that independent brand consultancy Wolff Olins has been in discussions with “potential partners” to develop the business, will fuel renewed speculation about the future of its independence.
Managing director Charles Wright spoke generally last week about the consultancy’s plans for development, which he says might include possible acquisitions. While never going as far as to say a sale of the consultancy is imminent, Wright has confirmed exploratory discussions “with a number of potential partners, who may be able to help us make a step change in our business”.
The consultancy has a special standing alongside the big branding networks, denoted more by the “quality” factor than the “reach” factor. And some would argue that its independence plays a part in this, a fact not overlooked by Wright. His management team at Wolff Olins will not have been short of offers over the years, from bidders desperate to get a piece of one of the hottest independent businesses left in the sector – it is one of only nine branding groups to generate UK profits in excess of £1m.
But Wright and his colleagues have always denied that the business was “up for sale”, or that it is now in talks with the marketing communications network Bcom3. Perhaps understandably.
“Sale” is not a word that sits comfortably next to “independence”, and the continued autonomy of the directors to run the business, following any “step change”, could well sit highly on their list of objectives. If such sensitive talks were taking place, Wright might feel it would be easy for outsiders to assume they were “simply selling out”. In reality it is never that straightforward.
But partnership arrangements are nothing new to Wolff Olins. A third of the company is already owned by Lloyds TSB Development Capital following the management buyout in 1997. Clearly, this sort of stake does not amount to a controlling interest, but will this change? Just how much, if any, of the business is on the table remains a matter of conjecture.
Wright suggests that scale for scale’s sake would be something to be avoided – it is something that will detract from the consultancy’s essence. “There is no doubt that you have to have an international office network. But building offices is not the point,” he says.
You can either be the biggest, the best or the most profitable, but not all at the same time, he goes on. “I cannot emphasise enough how being big and bland is not on our agenda,” he says.
“Given our strategy we are careful about what type of help will be appropriate for us to meet our ambition.”
On the horizon is the launch of a new “Web-based brand management tool”. The business might even make one or two acquisitions of its own, possibly with the help of Lloyds TSB, says Wright. “Being private, we have the luxury of investing where we choose, when we choose.
“In 1997, we did a management buyout with support from Lloyds TSB Development Capital, which owns 33 per cent of Wolff Olins as a result. In the period since then, Wolff Olins has out-performed our, and Lloyds’, expectations in all respects, including financial performance, portfolio growth and geographical presence,” he says.
“We do not have a ‘shopping list’ [of acquisitions] as such, but like many commercial organisations looking to expand their market sector and geographical reach, we will talk to such businesses where there is a strategic fit. These businesses are likely to have either the skills and/ or the geographical reach, not easily built organically. In addition, they are likely to be businesses where integration will not give rise to compatibility issues.”
According to Wright, the consultancy has had discussions in this respect with a number of businesses in various geographical markets, including the US, Brazil, Germany, Greece, Italy and Japan.
“Some discussions are initiated by us and some by the other party. We will continue such discussions where there is a strategic fit and where such businesses have skills and/ or reach that are not easily built organically,” he says.
There are, then, definite opportunities in overseas markets for the group. Work with clients such as Hutchison Whampoa – which will soon be launching a thirdgeneration UK mobile network – has taken it to Hong Kong and the Far East.
Given the right circumstances, the world is practically its oyster, and clearly Wright has a few options up his sleeve.
Valuing Wolff Olins
According to Results Business Consulting managing director Jim Surguy, Wolff Olins would certainly be rated as a ‘premium value company’. And assuming profits have increased, this figure will be higher, he says.
Wolff Olins reported profits last year: £2m
Suggested multiple: 12 to 15 times
Potential value:£25 to £30m
Wolff Olins facts:
Parent company: Shelfco (No 1327)
Investor: Lloyds TSB Development Capital (owns 33 per cent)
Projected growth this year: 15 per cent
Reported fee-income (2000) £16 000 007
Reported turnover (2000): £19 742 000
Offices: London, Lisbon, Madrid, New York
Key past clients: 3i, BT, Cadillac, Cap Gemini, Citibank, Diageo, First Direct, Go, Goldfish, Hutchison Whampoa, Mannesmann, Marbles, Tate Galleries/ MOMA, National Trust, Natural History Museum, NatWest, News International, Odeon, ONdigital, Open, Orange, Renault, Royal Sun Alliance, Vauxhall, VW-Audi
Bcom3 has 520 operating units across 90 countries
Main groups: Leo Burnett, D’Arcy Masius Benton & Bowles, Bartle Bogle Hegarty, Starcom MediaVest Group, Medicus, NW Ayer, Manning, Selvage & Lee
Branding interests: BBH, in which Bcom3 holds a 49 per cent stake, has an interest in the branding independent Identica