The state of dependence

At last, the fate of Wolff Olins is sealed. The deal with US-based marketing services conglomerate Omnicom Group gives it the financial clout to consolidate its global spread, allowing it to compete more strongly against the likes of Enterprise IG, FutureBrand and Omnicom stablemate Interbrand.

The acquisition, signed on Thursday, ends years of speculation about a possible merger for Wolff Olins, with partners as diverse as Bcom3 and digital media giant Scient deemed to be in the frame. In March, Wolff Olins managing director Charles Wright admitted to Design Week that the consultancy was in talks with “potential partners” (DW 9 March). But he, chairman Brian Boylan and directors Kate Manasian and John Williamson, who effected the 1997 management buyout, remain adamant that independence is important to them.

Wright has now changed his tune. While he believes Wolff Olins could have extended its global reach organically – as it has in London, Madrid, Lisbon, New York, San Francisco and Tokyo – or by acquisition, it might have sacrificed quality in the short term as its energies focused on the business side.

Industry speculation centred on Wolff Olins selling out to a global management consultant such as McKinsey & Company. That might have allowed it to retain a degree of autonomy rather than face the threat of merger with a stablemate, while realising its expansion plans.

Some maintained that only a management consultancy would have the cash to match what was rumoured to be an exceptionally high asking price for the consultancy. Whether it was above the £20m to £30m reported by the national press as the price paid by Omnicom is unknown.

Merger rumours peaked at the end of the first quarter of 2001 when a prospectus was seen in the US. So why the deal now?

Wright maintains the Omnicom tie-up gives Wolff Olins the autonomy it craves. Though it will sit within the conglomerate’s Diversified Agency Services division, alongside its rival Interbrand, they will be quite separate. Each will have a fair crack at any referrals from other Omnicom agencies and they will continue to compete for work head on.

DAS president Michael Birkin says this replicates Omnicom’s strategy in other areas, such as advertising where it owns BBDO Worldwide, DDB Worldwide and TBWA Worldwide, among others.

“We see Wolff Olins and Interbrand as very different businesses [in terms of style] occupying a similar space,” he says.

The Omnicom network also has “clients to die for”, says Wright, such as Pepsi, Daimler Chrysler, Mars, Visa, Mobil and McDonald’s, and with the deal comes the chance of a shot at them.

Wright and Birkin believe there is a strong cultural fit for Wolff Olins and Omnicom as both are concerned with quality, rather than financial performance. Wright talks of “a shared vision of what we could become”.

“We regard ourselves as the premier brand in this business,” says Birkin. “We are the highest rated in terms of valuation.” (FutureBrand owner Interpublic Group and Enterprise IG parent WPP Group continue to vie to be biggest.) Wolff Olins is “a jewel”, he says, that matches that culture. “It’s about the passion and creativity of the work,” adds Wright.

Though the deal has gone through in three-and-a-half weeks since initial agreement, Birkin says it constitutes “a long-standing relationship that’s paid off”. He has had his eye on Wolff Olins for some time. In a previous role at Interbrand in the late 1980s, he was envious of Wolff Olins’ reputation for creative quality, describing Interbrand at that time as “the terrier snapping at its heels”. He would have been interested in a deal at the time of the management buyout, he says. “But it wasn’t the right time,” he adds.

Birkin refuses to give details of the deal. It’s Omnicom policy, he says, and though the US-based group is a public company, by law it does not have to report the financial details. But pundits are putting the price at between £20m and £30m based on Wolff Olins’ reported £3m profits to May 2000 – it ranked sixth in DW’s Top 100 with design fees of £16.1m, a turnover of £19.7m in the UK and almost £20m in global design fees. It is likely there will be an earn-out period of three to five years, as there was when Omnicom acquired Interbrand in 1993.

So what will Wolff Olins do with the money? The impact will be relatively slow to show, says Wright, given that it is to fund gradual consolidation. He expects the UK business to match the European operation in size within three to four years and that the Far East will also grow, but more slowly. Neither he nor Birkin rules out the possibility of growth through acquisition, given the right fit, but organic growth looks more likely.

What will happen, he says, is that the business will be better run. There are initiatives running across the consultancy’s empire to make it more effective. London creative director Robbie Laugh-ton, who joins the board along with San Francisco creative head Eric Scott, is, for example, heading up a project to make sure it operates consistently as Wolff Olins across the globe.

But, says Wright, “there’s no mission to extend ourselves overnight.” Therefore with the deal done, it’s business as usual at Wolff Olins. For now at least.

Omnicom design interests

within Diversified Agency Services division

Interbrand – global identity network

IDH Group – parent to annual reports specialist Pauffley and digital media production studio Generator

New Solutions – brand and strategy group

within Omnicom BBDO

Fishburn Hedges – branding and communications

The Open Agency – branding and communications

Traffic Interactive – digital media design

within digital media arm Communicade

Agency.com

Razorfish

Oyster Partners

Organic

Tribal DDB

Red Sky Interactive

AnswerThink Consulting Group