Lennen & Newell

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Predecessor agency Lennen & Mitchell founded by Philip W. Lennen and J.T.H. Mitchell, 1924; renamed Lennen & Newell when H.W. Newell joined agency, 1952; acquired Geyer-Oswald, 1970; declared bankruptcy, 1972.


Lennen & Mitchell was founded in New York in 1924 by Philip W. Lennen and J.T.H. Mitchell with a single account paying a $1,000 monthly retainer. When Mr. Mitchell died in 1930, Mr. Lennen was almost a one-man show for several years, involved with every client and responsible for most of the ideas.

In the late 1930s, Ray Vir Den, who later became president, set out to modernize the organization, and by 1945, employees had health and life insurance and a pension plan, all paid for by the company. Mr. Vir Den's reforms included employee participation in management and developing a system under which key employees could purchase dividend-paying agency stock.

L&M considered itself a "big idea" shop. One ad written by Mr. Lennen to promote the agency, titled "Find the Man," maintained that "the best advertising . . . is not to be accomplished by mass production methods. People do that, not departments, plans boards, account groups, committees, commissions or bureaus."

One L&M client, Lorillard Tobacco Co.'s Old Gold cigarettes, reaped the benefits of Mr. Lennen's philosophy with classic ad slogans such as "Not a cough in a carload" and "Treat instead of a treatment."

L&M developed another "big idea" campaign in the silverware business. Field research for client International Silver Co. revealed that the practice of marketing six-piece silver settings was not what consumers wanted. Mr. Lennen's "Pieces of Eight" campaign recognized that eight-piece place settings were easier to sell than six and brought in more revenue, transforming industry practice.

L&M was also a pioneer in both radio and TV advertising, publishing a report in 1948 that told clients to "Get in [TV] or get left" but warning that the payoff could be years away.

By 1952, Mr. Lennen was in poor health after having suffered several heart attacks. To keep the shop going, he explored a merger with Geyer, Newell & Ganger. While the merger did not go through, Herman W. Newell, an exec VP at Geyer, decided to leave that agency and join L&M—on the condition that Mr. Vir Den, then president of L&M, be ousted.

Mr. Newell brought with him several major accounts, 20 other employees and a former colleague named Adolph Toigo. With Mr. Newell's arrival, the agency was renamed Lennen & Newell.

Within three years, Messrs. Lennen and Newell both were dead, and control of the agency and most of the stock passed to "Dolph" Toigo. Mr. Toigo ran L&N for 17 years.

Much of the agency's impressive growth from 1954 through the 1960s came from an acquisition binge. Among the acquired shops were: Buchanan & Co. and C.L. Miller Co., both New York (1958); Lawrence Fertig & Co., New York (1961); L.C. Cole, San Francisco (1964); Richardson & Hance, San Francisco (1967); Wyatt, Dunagan & Williams, Dallas (1968); Ackerman Associates, Oklahoma City (1969); and Dawson, Turner & Jenkins, Portland, Ore. (1969). At the same time, the agency was expanding overseas through joint ventures. By 1969, L&N had 34 offices outside the U.S.

In addition to a roster of blue-chip clients, L&N ran Hubert Humphrey's presidential campaign in 1968. It did notable work for American Airlines, National Distillers' Old Crow and Windsor Canadian liquors, Mazola oil and Niagara starches.

It introduced Vel detergent for Colgate-Palmolive Co. and handled its Lustre-Creme shampoo. It also launched cigarette brands Kent, Old Gold, Newport and True for Lorillard. By 1969, its billings were $140 million, it had 600 employees and it was the 13th-largest agency in the U.S.

Bankruptcy

On Feb. 2, 1972, L&N shocked the advertising world by filing for bankruptcy. The Chapter 11 petition listed liabilities of almost $11 million and assets of $6 million. Despite attempts to reorganize, client defections forced the agency to close in April 1972. Several factors combined to cause the worst financial disaster in advertising agency history.

The agency's demise started when L&N acquired "Hike" Newell's old agency in 1970, which returned $4 million less in operating revenue to L&M than it had expected from the acquisition.

Other acquisitions had been unprofitable as well. Lennen & Newell lost 75% of its billings in 1971, reshuffled management and sold several offices. Another factor was the one-man rule of Mr. Toigo, who, observers claimed, ignored many of the generally accepted rules of agency financial management.

Within the industry, the accepted principle of sole liability meant that once an advertiser paid its agency for media time, the media could look only to the agency for payment. Historically, that often meant that an agency suffered if its client's business failed, as the agency was still responsible for paying media.

In the unusual case of L&N, client payments to the agency were used to keep the agency afloat, delaying agency payments to media in what was called a "slow pay" problem. After the agency's demise, CBS sued L&N client Stokely-Van Camp to recoup more than $400,000 in media bills. The litigation dragged on for six years, but the court upheld Stokely's defense because CBS had failed to tell Stokely about the agency's financial woes and slow payment practices, yet it had continued to extend credit to the agency. CBS also had not informed advertisers that it would hold them liable.

However, the case prompted a long-term debate over sole liability that was finally resolved with a "sequential liability" compromise in 1991. Under "sequential liability," a medium could look to the agency for payment if the agency had been paid by the advertiser, but would be limited to seeking payment directly from the advertiser if the agency had not yet been paid.

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