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News Feature

By The Drum | Administrator

September 24, 2003 | 6 min read

The rumours have come thick and fast in recent weeks about what is going on at Faulds. Richard Draycott looks at the speculation and why it has gained credence.

Telephones at The Drum’s offices have been ringing red-hot this week with regard to whether Faulds is to close its doors for good or not. In truth, perhaps Dennis Chester’s phone has been ringing even more than anyone’s has, as the Scottish media catches a whiff of the potential demise of what was once Scotland’s jewel in the advertising crown.

By the time you read this, according to the ever churning rumour mill, the administrator will have already been into Faulds to assess the situation, but at the moment absolutely nothing can be taken for granted at Dundas Street.

Industry gossip can often easily be discounted as rival agencies taking pot shots at each other but, in this case, the rumours that Faulds, which in the not too distant past employed upwards of 100 people, could be foundering have been taken seriously, very seriously. But why this time?

It has been suggested by more than one person that Chester intends to close down the agency and relaunch it at a later date, in the not too distant future, under a new company name. This rumour has gained some credence because in mid-August bosses at Faulds did register a new company at Companies House, called Faulds Limited.

At the time, the agency played this down, saying that it was merely so that they could handle conflicting pieces of business but industry sources have seen little sense in this. It was also suggested that it was done to ensure that the agency founder, Jim Faulds, could not register the name and launch in opposition, but Faulds has shown little desire to do this.

Last Friday there was a staff meeting at which, it is believed, staff members could have been asked to sign confidentiality agreements in order to stop what was being planned by Chester and his management team leaking out. Again, perhaps a pointer to the phoenix-from-the-ashes scenario.

Another piece in this jigsaw came to light recently when one Faulds staff member turned down a move to a highly paid position, saying that he is staying put to benefit from the exciting plans that are in the pipeline.

So, where did it all go wrong for Chester, who had reportedly been heading up the agency for the two years before a deal was brokered to take ownership from Jim Faulds? Was there a fundamental problem with the agency when Jim Faulds sold it to Chester? It appears not, as, under its founder, the agency had a solid 15-year track record with absolutely no borrowings against it. It had £2m cash on the balance, turned over £40m and turned in a net pre-tax profit of £1m.

Some may suggest that Chester tried to expand too quickly into London during what was the most testing time the Scottish advertising industry has faced for more than a decade. The move to London, mimicking that of The Leith Agency, was questioned at the time. Even among the London agency set, the agency that Chester opted to take over, Malcolm Moore Deakin Hutson, was never considered a stable agency with a solid client base. MMDH had some good experienced people but ultimately it seems that they failed to integrate with the Edinburgh-based headquarters and its staff.

Perhaps the decision to appoint Guy Moore and Tony Malcolm as creative chiefs overseeing the Edinburgh-based creative partnership of Pete Armstrong and Steve Mawhinney (after the departure of former creative director Billy Mawhinney) was the wrong one. Insiders at the agency said at the time that this decision had caused some friction within the creative department.

This friction may ultimately have culminated in the rejection of creative work for the Royal Bank of Scotland by the bank’s top man, Fred Goodwin. Goodwin’s decision to put the business up for pitch saw Chester refuse to re-pitch for business he felt sure they would not retain. Was this Chester’s major mistake? Only last year The Leith Agency was in pretty much the same position with Standard Life, but they repitched and retained the business, despite speculation suggesting that the relationship had run its course.

Shortly after, Chester started talking of a deal which would see Japanese agency Asatsu TDK take a £1m stake in the business. Again, questions were asked by the industry as to the reasons for such a deal. However, that deal never came to fruition.

Relations between London and Edinburgh were never harmonious, the integration of two totally alien cultures proving too much for either party. The decision to close down the London office, after the departure of Malcolm Moore Deakin and Hutson, was a bitter pill to swallow but swallowed it was by Chester, who, shortly after, stepped down as managing director to take up the less hands-on post of chairman.

The agency’s reins were handed to former planning boss David McGlone to take over as MD, but even McGlone failed to stop the rot, with Kwik-Fit moving its media and creative accounts out of the agency and, more recently, Auto Trader taking its media account out of Faulds, along with Emap and Standard Life.

It has been this endless loss of major clients that has ultimately hit the agency where it hurts, again proving that no Scottish agency can realistically thrive when clients are walking away.

That said, it has not been all doom and gloom, with the agency picking up business from Aquidos and Pokerroom.com, but there are few pieces of business around that can replace a Kwik-Fit or RBS.

So the future is uncertain and, despite the denials that the agency is to close, something radical has to happen if the agency and staff are to survive. It may even be too late.

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