SapientRazorfish: What's in a name change and a restructure? Quite a lot, actually

Partners at Green Square, Corporate Finance Advisors to the media and marketing sector, cast their eyes over the latest industry deals and look ahead to the next tranche of acquisitions.

There was an interesting piece of news last week. Global network Publicis merged two of its biggest digital agencies, Razorfish and SapientNitro, to create SapientRazorfish. We’ll come back to that in a moment.

I found the story interesting – as well as timely – because I’d recently had a conversation with someone in the marcomms business.

Why, my colleague mused, do the big groups make such a big song and dance about restructures and changing the names of things? Why do they spend unimaginable amounts of money changing logos, shuffling senior management around and “integrating” departments? Why not just use the money more wisely and get on with creating great campaigns?

A good question and one that’s not easy to answer. A cynic might say that all this rebranding and restructuring is to give the senior managers, as well as the lawyers and accountants, something to do. The cynics will be given further fuel when it is noted that Publicis only acquired Sapient in a $3.7bn deal a couple of years ago; and that it had spent much money and time creating a unit for it, called Publicis.Sapient. So why another change, presumably at more expense?

It’s actually a bit more complicated than the cynics’ view. Publicis’ move isn’t just a rebrand, it’s a way of dealing with the structural changes that are occurring within the marcomms industry; it’s also, as far as Publicis is concerned, a statement of intent – and it may also be a sign that the Paris-based group is laying out a succession plan for when its high-profile CEO, Maurice Lévy, steps down sometime next summer.

But let’s look briefly at what is happening. Last week Publicis announced it was revamping its digital agency structure and leadership amid a company-wide reorganisation it first announced last December.

The French holding company – the world’s second-biggest marcomms group – said it was combining the two digital agencies under the new name SapientRazorfish.

According to industry insiders, the move had been in the works for months, but it came as a surprise to the 10,000 or so Razorfish and SapientNitro employees when it broke last week.

The reason for the change was outlined quite well by the Publicis’ media machine. The change, it said, was a response to clients’ “grappling with the dual objectives of change and speed - how to transform to be more digitally-driven businesses, and how to design and implement these changes at the rapid pace of change being dictated by the marketplace.”

The company also said that in an era of global mega-brands, it was essential to pool resources, particularly in the digital space, to satisfy those brands’ demands for what we might call “solutions at scale”. Collaboration, and the pooling of resources, is one of the biggest trends of this century. You see it everywhere – from crowdfunding schemes like Kickstarter; “sharing economy” successes like Uber and Airbnb; to the increasing number of agencies adopting the “Hollywood model” – a few principals hiring in on a project-by-project basis, choosing the most appropriate personnel for a particular job from a pool of self-employed freelancers. In a business whose margins are always under pressure, this approach makes business sense.

Similarly, within big groups with multiple agency brands and thousands of staff, there is an argument for “shop silos” to be demolished, so that the best people for the job can be deployed quickly and effectively.

It looks as if all bases will be covered by the restructure: SapientRazorfish will be part of the Publicis.Sapient "solution hub", which also includes Sapient Consulting and all DigitasLBi operations. Publicis’ “brand experience network” Rosetta will continue to operate as a unit dedicated to the all-important Samsung business (Samsung may need a lot of marketing in the coming months, given its recent Galaxy Note 7 travails).

The announcement also makes sense given the wider Publicis Groupe's "Power of One" approach, which focuses on consolidation as a selling point for clients eager to cut marketing expenses and streamline partnerships.

It’s probable that Publicis hopes SapientRazorfish will leave the holding company better prepared to address the challenges in the years ahead.

So, looking at the bigger picture, Publicis.Sapient is the last piece in Publicis’ larger restructuring plan, alongside simplifying its creative and media agency networks. Publicis last year said it would merge all creative operations under a larger group called Publicis Communications, led by Arthur Sadoun. It also said it would combine and bring separate media agency operations under one boss, Steve King.

The only group within the holding company that had not been restructured was the growing digital unit – until now.

Levy recently called 2016 a “year of transition” as he focuses on integrating Sapient better and attempts to get his myriad agencies to work more closely together.

Which leads us on nicely to the succession question. Unlike his great rival at WPP, Sir Martin Sorrell, Lévy has promised to retire next year, although no firm successor has been formally named.

But Alan Herrick (who’d spent almost 20 years building up SapientNitro into a multi-billion-dollar powerhouse), currently chief executive of Publicis.Sapient will move into the role of chairman of the network, “focusing on strategy and market development at the Publicis.Sapient and Publicis Groupe level.” That puts Herrick in a good position to take over the top job, particularly given Publicis’ drive to digital over the past few years. Of course, Publicis Worldwide CEO Arthur Sadoun is still widely seen as Lévy’s heir apparent, but Herrick, if he does well in his new role, makes for a very credible rival.

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

Get The Drum Newsletter

Build your marketing knowledge by choosing from daily news bulletins or a weekly special.

Come on in, it’s free.

This isn’t a paywall. It’s a freewall. We don’t want to get in the way of what you came here for, so this will only take a few seconds.