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Taking flack

29 December 2014 By Quentin Webb

M&A spin doctors may get swept up in the action. If anyone knows how to assess the climate for takeovers, it should be financial public relations advisers.

A $3 trillion-plus merger bonanza with plenty of hostile bids and activist investors creates a timely backdrop for sellers of all sorts. Three of the busiest deal whisperers – Alan Parker’s Brunswick Group; Joele Frank, Wilkinson Brimmer Katcher; and Sard Verbinnen – remain tantalizingly independent. In London, Andrew Grant’s Tulchan and Rory Godson’s Powerscourt are, too.

Previous booms led advertising conglomerates WPP, Havas and Publicis to the doors of such financial communications firms as Finsbury and Abernathy MacGregor. Their experiences in the field have been patchy, though. Rival ad groups without a top-tier firm in the niche also are admittedly busy. Omnicom is rebounding from a failed merger with Publicis while an activist is hounding Interpublic.

Buyout firms also have taken a shine to PR. Advent, for one, invested in London-based Financial Dynamics before its $260 million sale in 2006 to FTI Consulting. Teneo, a corporate adviser co-founded by two FTI alumni and a former consigliore to Bill Clinton, has just secured backing from BC Partners.

Such acquisitions can be as treacherous as buying an investment bank. After all, they’re about people, who easily can walk out the door – along with their clients. London’s M:Communications, for example, imploded after a 2008 sale to private equity-backed Sage Holdings, which later became King Worldwide. The target firm closed its doors last year and the Ms in the old company name, Nick Miles and Hugh Morrison, recently resurfaced with a new shop, Montfort Communications.

Publicis bought Kekst in 2008 and founder Gershon Kekst stepped down two years later. The 44-year-old firm has since slipped in the league tables. Britain’s Incepta, which later united with Huntsworth, perhaps tells the most cautionary tale. After a takeover in 2000 of Sard Verbinnen went sour, the founders bought the outfit back at a fraction of the original purchase price.

The message should be pretty clear for prospective buyers – and agencies tempted to sell. As with any M&A transaction, it’s vital to look past the spin. Drafting the celebratory press release is the easy part.

This view is a Breakingviews prediction for 2015. Click here to see more predictions.


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