Merging manoeuvres

As in the thrusting Eighties, the design industry has entered a new phase of acquistions and mergers. But Nineties globalisation is less about physical presence and prestige overseas and more about exporting expertise while maintaining autonomy, explains

Back in the Eighties, acquisitions and mergers were all the rage. Like giant whales encountering plankton, British advertising, design and communications groups sucked up everything in their path. Between March 1987 and June 1988, Saatchi & Saatchi, WPP, Michael Peters, Fitch, WCRS and Addison collectively spent more than 60m on the acquisition of US design interests.

Then the recession kicked in and groups were dumped, folded, sold off, and declared bankrupt. It was back to basics, the low-overhead consultancy, the one-person studio, the mom and pop design shop and the itinerant art director.

Judging by this season’s news, we’re about to enter another bout of acquisition and merger fever. In September this year, Interbrand Group, the branding giant owned by Omnicom, snapped up the New York packaging design group Gerstman + Meyers. In October, CKS Group, the buzzing Silicon Valley advertising-design firm, purchased New York’s Donovan & Green, an exhibition and information design company. And next month, Chicago’s strategic design planning specialist Doblin Group is expected to announce a merger with Perot Systems, the information technology services company. Are the Eighties back in fashion already?

But there is a subtle difference. In the Eighties, the word was globalisation. Bigger was better. Overseas offices raised company prestige and supposedly brought in more money back home. Globalisation in the Nineties, however, signifies a more culturally sensitive approach to overseas markets. Brands are pushed more than their owner corporations. Brands like Nike, Benetton and MTV are chameleon-like, fresh and flexible. Globalisation in the Nineties is also a word more suggestive of the media than the company, raising the spectre of the World Wide Web and satellite TV. The demand for local design presence overseas has diminished in place of a demand for specific expertise, be it in interactive media, product innovation or information design.

Nineties acquisitions are more cautious and strategic. CKS Group’s acquisition of Donovan & Green completes the multimedia focus of the company, adding concrete exhibition design expertise to a group noted for its bent on the virtual and digital worlds. “We share the belief,” says Donovan and Green founding partner Nancye Green, “that new media is one part of an integrated strategy”.

Doblin Group’s link-up with Perot Systems (yes, it is presidential unhopeful Ross Perot’s company) took two years to solidify. The merger takes form in a consultancy dedicated to the invention and implementation of “breakthrough” products and services. (“Breakthrough” is the US buzzword for innovations like the Post-It note, the Motorola flip-open mobile phone and the Federal Express delivery service.) In this marriage, Doblin provides the know-how in design planning to create the breakthroughs, and Perot Systems, a group whose expertise in reorganising businesses and running their information technology systems brings in $600m (387m) a year, provides the implementation skills. Doblin Group president Larry Keeley has no doubt about the benefits. Alone, Doblin Group could expect an annual growth rate of “10 to 15 per cent”, he says. With Perot, that figure rises to “30 to 40 per cent”.

It is a fact that design groups, if they choose to grow, are often obliged to take in work they’d rather not do. Growth on the back of a larger parent has its pitfalls, too, incurring situations where the parent hands down projects that do not fit within the consultancy profile. But Keeley reckons that the Nineties approach to mergers and acquisitions is sensitive to this danger, allowing the acquired design groups to remain largely independent of the parent. “Too much integration leads to organisations that don’t trust each other or work well together. That happened in the Eighties,” he says.

Let’s hope he’s right. If UK groups are to follow the same pattern of resuming mergers and acquisitions in the wake of a receding recession, the manoeuvres should be handled with kid gloves. Let the focus of the current decade be on providing strategic skills rather than prestige and income. And if the match looks compromising, it’s best to stay small.

In a digital age, the small group and the lone, itinerant consultant still has the lowest overheads, the quickest profits and the fastest feet.

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