Do you mind being put on hold?

Mergers are a ripe source of client work, but if the timing is wrong they can severely disrupt existing projects.

Last week, Europe’s largest cable operator, UPC, unveiled the UK brand guidelines for Chello (DW 21 July), its broadband Internet service, designed with Interbrand Newell and Sorrell and Myriad Creative. Within a few hours of them being released, a deal was announced that would leave a giant question mark over the fate of the branding project. Chello was to be merged with Excite, the global Internet service provider, and a new brand, Excite Chello, would be created as a result.

Fortunately for Chello, the project was not so much a full launch, rather the tail-end of a European implementation programme, the brand having been already established in Europe. But, while the newly launched guidelines will no doubt be of some use, they will, needless to say, need to be completely redone.

Most design consultancies will be all too familiar with this scenario. The problem is that a proportion of any consultancy’s design projects is always going to go belly up, explains Icon International head of brand and marketing Tim Fendley. Fendley oversaw the merger of MetaDesign and Icon Medialab at the end of last year. This is not a seasonal phenomenon, “it’s the state of business,” says Fendley. He agrees much work is jeopardised by “external pressures” such as mergers, and “internal pressures” such as departmental restructures. He goes as far as to say: “There is probably as much work lost as there is won due to client restructure.”

But, a noticeable increase in terminated design projects has appeared with this latest season of mergers and acquisitions. It is the unfortunate flipside for consultancies: while mergers are a ripe source of client work, particularly in brand strategy, identity and corporate communications, they can also be damaging. If it is not anticipated a merger can threaten a consultancy’s client work irreparably.

“Over the past 12 months SAS has had five projects go on long-term hold or be suspended due to merger and acquisition activity. With one project we were appointed, but the project never started. We completed another, a large identity project that was never launched due to takeover/ demerger. On three other projects we completed the strategic, planning and definition stages and were in the middle of creative concept development when things were stopped,” says SAS new business manager Leonard Rau.

This is not just happening with shaky dotcom clients either, it seems. According to Rau, it is happening across the board, “in brand strategy and consultancy, corporate identity, corporate communications and Web work”, he says, “We are talking about FTSE250 companies here – it’s not just smaller clients.”

One client, United Biscuits, appointed SAS to develop brand identity guidelines and then its annual report, but the work went on indefinite hold after UB was delisted last year. A UB spokeswoman explains the scenario: “Last autumn the board of United Biscuits Plc announced that it was exploring strategic options to maximise shareholder value. That process, lasting around seven months, culminated in a change of ownership earlier this year which led to delisting and a move to private status.

“The uncertainty surrounding UB’s destiny during this episode in our corporate history forced us to put the work we had been doing with SAS on our identity guidelines on hold. I wish I could say that we’re back on track. But we’re awaiting the appointment of a new chief executive officer who will have his own views about the UB brand, so we’ll have to wait and see whether it’s appropriate to resurrect the work that’s been done to date,” says the UB spokeswoman.

“It was a double blow for SAS. In August of last year, it came out on top in a competitive pitch to pick up our annual report for 1999. The change of ownership eliminated the need for us to produce a full report, so that business disappeared pretty much overnight,” she adds.

Such delicate situations are exacerbated by the rules of the mergers and acquisitions game, which forces clients to play their cards close to the chest. The Tutt Consultancy founder Simon Rhind-Tutt, however, believes these kind of scenarios underline the greater problem in the design industry of securing reasonable contracts with clients.

“A lot of consultancies just do not have the contracts in place to safeguard themselves. If they don’t ensure the terms-of-business have been signed by the client they are putting themselves at huge risk. A legal terms-of-business is now a necessity not a luxury,” says Tutt.

“I would go as far as to say that a client which is not willing to sign the terms-of-business is probably not worth dealing with anyway,” he adds.

In the case of SAS, contracts had been in place, says Rau. “If work has been commenced the client has usually asked us to complete that stage of the project,” he says. But half-finished projects carry little weight in terms of prestige, especially if you believe that you are only as good as your last job.

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