CIA MBO ETC
Do these two really need a caption? Oh, alright. On the left we have Graham Milne and to his right we have Philip Jones, both managing partners of Spirit Media Scotland.It was the media event of the year. Telephones began buzzing and e-mails began dropping into in-boxes across Scotland.
A media frenzy was setting in and it was rumoured that Lothian and Borders Police were on full alert when, last Thursday, it became apparent that things were most definitely afoot at Mediaedge: CIA Scotland.
Former managing director Philip Jones had been seen by some eagle-eyed media spotter unscrewing and taking down the CIA Scotland sign that had adorned the company's Broughton Street offices for the last three years.
Had the much vaunted MBO deal been signed and sealed or had Phil simply taken a notion to do a little DIY at his former place of employment?
As it turned out, it was the former, but the taking down of the bronzed CIA Scotland sign did, does and will represent something much more significant than the unscrewing of a few screws for the new managing partners of Spirit Media Scotland, the new name given to the agency.
"Philip and I began talking about an MBO last September. Ray Sale actually came to us around October and said why didn't we consider buying the business and we said 'Well, actually we are already having conversations.' Ray brokered the deal on our behalf with the guys in London.
"We have had to make big decisions at every turn as to exactly what this deal will involve, and it has been frustrating at times waiting for contracts to be drawn up and signed, but we have come out of negotiations with a deal that we are all very happy with," says Milne.
Sale, the former chief executive of Mediaedge: CIA Manchester, who, sadly, passed away in December, brokered the deal after bosses in London had decided to refocus the company's efforts on its London and Manchester operations. This re-focusing had come about after the purchase of the CIA's parent company Tempus by WPP, a move which many believed would lead to the closure of CIA's Scottish operation.
So, was it a case of Milne and Jones striking while the iron was hot, or indeed while there was still an iron to strike for?
"The guys in London were very open to the idea of selling Scotland. It has all been amicable, well, as amicable as these things can be, and there has been no more money involved in the deal other than Philip's and my own," says Milne.
"If you look at how Mediaedge: CIA has restructured then it is clear that their strategy is to focus on opportunities for their London and Manchester marketplaces in the future."
Both managing partners are remaining tight-lipped over the amount of money involved in the deal, but one formula mentioned by Milne would see the amount paid for the agency sitting at around £250,000, not a bad sum for what is now Scotland's biggest independently owned media agency and only one of two Scottish-owned independents, the other being Ernie Nichols Media.
Jones says: "The most significant thing from this deal is that structurally we are now the biggest independently owned buying point north of the Border. That is even more significant in this climate of globalisation. Agencies in Scotland and the regions are being sold, but here is an agency being bought from Scotland, which can only be good for the Scottish marketplace and Scotland in general."
The MBO will see Spirit Media Scotland retain all of its six staff. However, Tania Alonzi, who headed up the Intelligent Finance media business when the agency handled it up until last year, will now report to Mediaedge: CIA Manchester, though she will still be active in the Scottish media marketplace.
Other than that the deal will mean no changes at the agency on a day-to-day basis and the loss of the group resource is being played down.
"We will not suffer from not being part of the group. For instance, we will not suffer from no longer having an office in Stockholm, why should we? We have a strong team here and there will be no effect on them, but we will be looking to strengthen the team in accounts and finance. The business is still here as before. We have spoken to all of our clients and all of them seem very happy with the new arrangement. We have delivered what we needed to deliver in the first three months to ensure that everything to do with this deal makes sense."
The history of CIA in Scotland is amongst one of the more colourful of Scottish agencies and during that journey there have been highs and lows for Milne and Jones. CIA first opened in Scotland in 1993 as a joint venture with Barbara Moyses - Barbara Moyses CIA. That partnership broke down in 1995 and CIA became part of a joint venture with John Morgan's Morgan Partnership when he took over the Kwik-Fit business to rescue Timberbush from closure. This created Morgan CIA. Phil Jones joined a year later after a decade at Scottish Television and, in 1997, CIA broke away from Morgan and became a standalone operation under the watchful eyes of Milne and Jones. At that time the agency had offices in Edinburgh and Glasgow (still within The Morgan Partnership), but in 1999, shortly after CIA lost the Kwik-Fit media business to Faulds, the Glasgow office was closed and Edinburgh, which had been the headquarters since Milne had relocated in 1998, became CIA's single Scottish office.
After the loss of Kwik-Fit, many thought that the writing was on the wall for CIA Scotland, but Milne, Jones and their team hit back by scooping the £15m Intelligent Finance media brief. But the good times only returned temporarily as the IF business headed south last year and Jones was made redundant.
Again, many doubted their to bounce back, but that's just what they did, picking up the £5m NEC business and, more recently, the Highland Spring business from Universal McCann. Last year CIA Scotland billed £11m, a figure down £4m on the previous year with turnover for 2001 being £600,000. Milne also hints that another national brand is soon to be unveiled as a new Spirit Media Scotland client.
So, are the tough times over, or does investing money in their own agency at such an economically sensitive time for many mean that their troubles have only just begun?
"Most people have had challenges to face over the last few years. It is certainly not unique to CIA. Many agencies have had to downsize and lay people off. We are very focused on our proposal. Our clients have been very supportive and the media owners have been very supportive. We need a new fridge to fit all the champagne in."
As he speaks, yet another bouquet of flowers is delivered, this time from Viacom Outdoor, to graphically illustrate the level of support. Milne goes on: "Everybody knows us here in Scotland and we have 35 years' experience between us. You do not achieve that without the goodwill of the people you work closely with."
Jones adds: "I think that this is the perfect time to do this despite the economic climate. Why? Because nobody else is doing it. If everybody is looking at consolidation, globalisation and critical mass then our focus regionally, locally and on SMEs means that we can use our skills to their very best effect."
So, what of the future? Is Spirit Media Scotland set to replicate the success of Feather Brooksbank and employ 30-plus people, or follow the example set by Mediacom and keep staff numbers tight while making impressive billings?
"Do I want to be billing £70m a year? That's not really what it is all about. We want a strong business that delivers profit. That is what's important. It is not about being the biggest, like many would have you believe," says Milne.
"Feathers has taken ten years to get to the size they are, but their first five years were pretty modest. If we can replicate the success of Feathers then that would be great, but we are not Feathers. I have to look at what is right for the team here.
"We are offering our clients a very broad church. We are not going down a creative route, but there is a more creative approach here. We will look at what is right for our clients, so I suppose you could say we will be touching on an integrated approach. Media will obviously continue to be our core business, but we have more experience here than just media and we will use that experience to differentiate ourselves in the marketplace. We have a flexibility and an attitude here which says we want to breathe some new life into media."
And, speaking of new life, the name Spirit?
Jones says: "For starters, we are not called Spirit because we are in a church. We knew what we didn't want to be called. We did not just want to be two names like many agencies. We wanted something fresh that embodied the soul of the people who work here and who have supported us through this process. Spirit seemed to embody the willingness and the ballsy attitude of the people here."
At the moment, Jones is adamant that an office outwith Scotland is not on the cards, but perhaps an association with another major player would be entered into, but only if the said partner brought real value to the company.
Milne says: "We are not confining ourselves to Scotland. We have always spent more money outside Scotland than in Scotland. We have many clients based outside Scotland. We have a fantastic position and are confident that we can take the nitty gritty and move a business forward. Also we are big enough people to know what we can and can't realistically get. We are not going to chase everyone. We are not going to buy clients in. If a piece of business is not going to be profitable then we will not chase it."
And so, the media industry awaits its next MBO. Yellow M is hotly tipped as the next to go through, but in such a climate of unrest it could come from anywhere.
Even if that doesn't raise temperatures in the next few weeks, surely when Phil Jones hangs up the new sign outside their office telephones will be ringing red hot again. We might even arrange a photographer to capture the moment for posterity.