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Communications Consolidated Edelman

Why the PR industry is attracting a flurry of mergers and acquisitions

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By Barry Dudley, Partner

October 1, 2014 | 7 min read

I know it was only a few weeks ago that we last wrote about public relations, but it’s a subject worth returning to – after all, it’s the space where an awful lot of M&A activity seems to be going on right now.

Why is this? First of all, PR as a discipline is becoming ever more important to marcomms. But also, I think it’s because there are far fewer giant PR agencies – the Hill & Knowltons, Burson-Masteller and Edelmans of this world – than there are equivalents in the advertising worlds. In terms of consolidation, of developing vast global networks, PR is perhaps behind the curve.

But biggest isn’t necessarily always best. Public relations, particularly here in the UK, is characterised by a few big consultancies and hundreds of smaller, more boutique outfits, many of them offering a local or regional service. The vast majority have fee income of below £5m a year. But they seem to be thriving – and the existence of a “second tier” of ambitious agencies below the international networks, looking to expand organically, makes for a thriving M&A scene.

Let’s take the example of Four Communications, which last week put in a bid to acquire 100 per cent of Consolidated PR. Four is now one of the top five independent PR shops in the UK, thanks to an aggressive acquisitions policy over the past couple of years. Last year, for example, it did no fewer than three deals – B2B and tech specialist Kinross + Render; Colman Getty, which specialised in “culture and campaigning”; and bgb, a boutique outfit focussed on tourism and travel.

Established in 1990, Consolidated is best known for its work with Sony, but it’s also worked with Greene King, Tourism Ireland, American Express and Walt Disney.

Four’s offer has been recommended by the board of Consolidated and more than 90 per cent of shareholders have already agreed.

Consolidated has offices in London and Edinburgh and is the only UK agency on both the Government communications framework and the Scottish Government roster – given that this kind of work is both highly valued and somewhat hard to come by, it’s easy to see why the company would have been attractive to prospective buyers.

The deal is expected to complete in early October and will boost Four Group's fee income by about £2m to £15.5m, which doesn’t sound like a huge amount, but according to the income league tables it puts Four into about fifteenth place in the UK, just ahead of Cohn & Wolfe.

Nick Clark, Consolidated MD, would join the Four Communications Group operating board and directors Will Holt, Elspeth Rothwell, Liz Fay and Anne Clarke would become practice directors; and Rothwell is also promoted to deputy MD of Consolidated PR. So the all-important senior talent is retained.

And both parties benefit: Four gets a boost in its fee income, acquires good managers and some great clients; given that the best growth in PR is likely to come from integrated work done for international clients, it’s no surprise that Consolidated has elected to join the Four fold.

Once the deal is done, Consolidated PR would initially retain its brand whilst the companies plan for the future. Consolidated’s London staff would move to Four’s offices in London Bridge.

The Four Group has grown from seven to more than 200 staff (including Consolidated PR) since its launch in 2001 – pretty impressive growth.

At the top end of the scale in income terms, Edelman, the world’s biggest agency, has also been busy this month, buying up Agence Elan, France’s biggest indie. The highly-rated Elan has established itself as a powerhouse in its home country after only six years. In fact, its €8m revenues eclipse those of Edelman in France; and its clients include true frites bleu such as L’Oreal, Danone and Sofitel.

In a very canny move, the acquisition has been marketed as a reverse takeover.

Despite being the world’s biggest agency (and the only multinational network independent still independent of the big holding groups), Edelman has struggled to establish itself in certain territories, France especially. Its fee incomes there languish below €6m and the firm’s French outpost has been without a leader for months. The two firms will remain as nominally separate entities for the time being, with Elan founder-figurehead Marion Darrieutort in charge of the €14m business, but it’s likely that the Elan name and culture will prevail: after all, if you bought the most impressive and best-thought-of business in your sector, you wouldn’t throw away that goodwill, would you?

From what I’ve heard, the French firms will act as a kind of “ideas incubator” for the wider Edelman network: very sensible thinking, as Edelman is perhaps not as fully-integrated with the digital world as Elan; nor is it, with its specialisation in crisis management and corporate work, perhaps as “sexy”.

And for an example of the importance of PR as a discipline in integrated thinking, we need to cross the Atlantic and the US to San Francisco, where branding agency Lippincott has just made the very first acquisition in its 70-year history, buying internal communications and employee-engagement specialist PR firm Bonfire Communications.

The combined firm’s capabilities will include “leadership vision and alignment”, leadership development, employee communications, and talent development.

The deal will bolster Lippincott’s ability to [what it calls] "comprehensively address all aspects of brand building from strategy to expression through employee behaviour and customer experience".

For a long time, the most forward-thinking business leaders – including CMOs – have realised that to deliver the best possible customer experience, employees need to be motivated and inspired, and firms need to have the best possible talent. In other words, if a firm is making some kind of promise to its customers, that firm’s staff need to believe in that promise too, and to feel confident that they can deliver it. Internal PR or marketing, in short, a discipline which, as corporates and their personnel come under increasing scrutiny from customers, campaigners, media and regulators, will become ever more important. And PR’s reach into every corner of business life will move one step closer to becoming complete.

It’s all a long way from punting press releases out to the media, and organising stunts and photoshoots… but public relations, always the fastest-developing of marcomms disciplines, still has much further to go. Exciting times ahead.

Barry Dudley is a partner at Green Square, corporate finance advisors to the media and marketing sector

Communications Consolidated Edelman

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