Over the last year, a few people asked me to develop a post regarding the failure of advertising agency mergers. I sent out some feelers and was astounded when people forwarded my questions to friends and friends of friends who had been involved with either a merger or agency buyout. Some of the mergers went back a couple of decades and one lively octogenarian not only asked to be included but made some timeless comments. Also, what came out of the inquiries was that not all mergers and buyouts were failures. Some of the more successful ones quietly went about their work despite a rocky start and still survive today.
Setting the Stage
I do not think that it is an unwarranted assumption to say that people who start advertising agencies that lasted are different from many business people. They took a huge risk in opening a shop no matter how small it was. There was zero security. Many opened up as they were angry--they worked at an agency where someone else was taking the credit for their work or where management could not grow the agency fast enough to keep them. After being your own boss for a decade or two, it is virtually impossible to merge with someone and have equal partners after you or a few close cronies have called ALL the shots. If you were bought out, it is a painful transition of a different kind where you are reporting to others and have lost much of your decision making clout. For agency chiefs who had a strong self sufficient ego, this can be painful at best but usually impossible.
Also, every ad agency in my experience has a unique culture. They are not interchangeable as many banks or insurance companies are.
Here are a mixed bag of comments from some battle scarred veterans of the merger/buyout game:
--“For years, I pretty much did as I pleased. One week in to the buyout, this dweeb from the accounting department came in to my office and reviewed by expense account line by line. It was humiliating. He told me that I could not have two scotches on a cross country plane ride. The jerk was overreaching but our new owners were insensitive fools. A lighter touch with us, and especially with me, would have helped a lot. Things fell apart fast. We lasted a couple of years but it was a disaster.”
--“I foolishly ran my little agency as an extended family. It worked well when you had less than 20 staffers who had worked together with almost no turnover. When we were bought out by a firm several times our size, we were unprepared. We could no longer cover for people with personal problems or weaknesses in certain areas. Our accounting and billing had been sloppy while our new leaders were buttoned up and they taught me a lot in that department. Their cash management was top notch. Had I known what they knew, we might have stayed independent!”
--“When we sold out, we positioned it to our team as the chance to work on a bigger stage. It was a flop. They were condescending to me and my associates and, after a year, tried to keep us away from our long term clients. A few of our junior people thrived as they loved the resources that our new owners had. Their healthcare and 401k plans were a big step up but I got tired of being treated like dirt.”
--“Merger! What a farce! We both knew that we needed added strength in several areas and thought that 1+1=3. Well, my new partner or Co-CEO wanted to push me out after a couple of months. I was 15 years older than he so I let everyone know at the merger that he would one day be czar. At best, I wanted five years. He had no patience. Many of my team left within a year. I hung on although he kept me out of the loop as much as possible. It was humiliating.”
--“I had to do a merger. I was getting old and no one or no group of my employees could buy me out. No bank would give them a loan. And Omnicom et al had no interest in buying my little operation. So, I merged to feather my own financial nest. The other shop’s CEO was decent to me and a few of my senior people are still with him. Was I selfish? I wonder about it. But, most days I feel that I did what I had to do. The culture shock was tough for us to swallow. Until you live it, you never know what it really is like.”
--“We sold out to a much larger shop (six times our size). The CEO got me in to the mix and even had me meet with key clients and gave me one big one to oversee. After I met with the large client, a junior A.E. and I took him to dinner at a well known steak house. I ordered a bottle of single malt scotch and the client loved it. When he slipped in to the men’s room, they young A.E. told me that I could not order something so expensive. I held my temper but was furious. When I got home, I was still really hot. My wife, god bless her, sat me down and told me that we both knew there would be some adjustments. It was not my bat and ball anymore. So, I swallowed my pride and stayed for years. I now have a great retirement as I earned more at the larger firm than I ever did at my own. It was bumpy at times, of course, but many of my team is still there.”
--“I was an arrogant know it all. When we were bought out, I thought that I would take the new agency by storm. After a month, I was humbled. Big time. They had people with much broader experience than I did and their young people were on top of changes in the industry. I was stunned at how infantile our production estimates had been relative to theirs. They ran a tight ship. I checked my ego every day. I was in my 50’s but still learning. It was great.
-- “When we were bought out, we were relieved but nervous. The new owners behaved impeccably. They left us alone on our long standing accounts but had media and research services that were much better than what we had. Also, they put junior account people and creatives on our key business so the client became used to them over time. When I was ready to retire, people were in place whom my clients, now ours, trusted. They did it right and treated me with respect.
--“We were totally unprepared for the digital revolution. Was anybody really ready? Our new owners helped us and trained a few young people who have made the transition from traditional media to on-line and mobile. We would have closed our doors a few years ago if we had not sold out.
--Finally, my octogenarian friend added some interesting words of wisdom. “Mergers and acquisitions generally do not work. In my long life, they seem to work best in natural resources. A small oil company or natural gas producer is up against the wall with either too much debt or low energy prices. Along comes a giant who scoops them up in a downturn. The staff may report to the same foreman but the benefit and pay package is often better. They have state of the art tech that the wildcatter did not. Some leave but, for those who are disciplined, it often works out pretty well. Ad agencies are different. Many CEO’s are pompous--I certainly was. If you go in to a deal with the right attitude and recognize that you might learn something and also survive long enough to use it, then you can benefit.”
This is only the tip of the iceberg of the comments that I received. Many were so angry and obscene that I chose not to repeat them. Also, no one in my sample was in New York or was purchased by a publicly traded mega-shop. Times will change and several years from now there will be many new advertising platforms. Human nature, however, will not change so there be likely similar stories to these told above 20 years from now.
If you would like to contact Don Cole directly, you may reach him at firstname.lastname@example.org or leave a comment on the blog.