In the late 1950s, there was a steep increase in merger and acquisitions, prompted by sagging profits and the rising importance—and rising costs—of TV advertising. According to Advertising Age, 120 agencies made such moves in 1958, compared to only 50 in 1955. Prominent among them were the mergers of Paris & Peart into Gardner Advertising and of Buchanan & Co. into Lennen & Newell. Most acquired agencies lost their identities, but when two of the biggest agencies of the 1940s merged in 1959, their names were simply joined to create Erwin, Wasey, Ruthrauff & Ryan.
In a few cases the larger agency permitted the acquired agency to continue operating as a separate profit center under its own name. That was the case when McCann-Erickson purchased Marschalk & Pratt in 1954. McCann ultimately pulled ahead of J. Walter Thompson Co. in the 1960s on the strength and volume of its mergers.
The birth of Interpublic
In 1960, a year in which 128 agencies were involved in mergers, McCann established Interpublic Group of Cos., the first agency holding company, whose sole purpose was to acquire other agencies. Meanwhile, as near equals came together in greater numbers, mergers grew in size.
In 1963, Keyes, Madden & Jones merged with Post, Morr & Gardner to form Post-Keyes-Gardner, which became a hot Chicago shop in the 1970s on the basis of large Brown & Williamson tobacco billings. And in 1964, Needham, Louis & Brorby joined with Doherty, Clifford, Steers & Shenfield to form the powerful Needham, Harper & Steers Advertising.
Because all agencies were privately held, the mergers and acquisitions to that point had been by mutual consent. But when Papert, Koenig, Lois went public in 1962, the groundwork was laid for the unwelcome mega-mergers of the 1980s, as agency equity became a product of the free market.
Other agencies—including Foote, Cone & Belding; Doyle Dane Bernbach; and Ogilvy & Mather—also soon went public. The primary incentive was to permit senior executives to exchange their shares of ownership for cash without giving up control of their agencies. Few considered that the practice would expose their companies to hostile takeovers.
Emergence of global agencies
Global mega-agencies are advertising and public relations firms that operate on a worldwide basis through a portfolio of institutions with local, regional and international scope. They emerged in the 1990s as a response to the global marketing activities and needs of multinational enterprises. One of the first agencies to act on the trend of global marketing needs was Saatchi & Saatchi Compton Worldwide. The move by Saatchi & Saatchi to consolidate, restructure and strengthen its offices in the western U.S., with regional headquarters in San Francisco, was aimed at positioning itself for Pacific Rim business.
The largest agencies benefited from the increasing volume of global advertising. From 1976 to 1989, the market share of multinational agencies rose from 14% to 30% of billings worldwide, as companies aligned their brand advertising with the same agencies across North America, Europe and Asia. By 1992, the top 10 agency networks had a combined share of more than 48% of global spending on advertising. The largest agency network was Interpublic, which included McCann-Erickson, Campbell-Ewald and three other agencies. The next largest network was Ogilvy Group, whose four main agencies had 1992 worldwide billings of nearly $4 billion.
The effects of mergers
Despite the merger mania that began in the late 1980s and created even larger advertising conglomerates than in previous decades, the mergers and acquisitions did not always lead to better company performance or improved profit margins.
Saatchi & Saatchi, for example, announced that profits in 1989 were significantly lower than in 1988. Because of a reorganization, it reported a post-tax loss of $24 million in 1989 against a profit of $139 million in 1988. After its acquisition spree, Saatchi & Saatchi lost the Colgate-Palmolive Co. account, with billings estimated at $110 million, and Procter & Gamble Co. later pulled $85 million worth of accounts from the agency.
On the other hand, when advertising agencies merged across international borders, they sometimes acquired operational strength in individual countries. For example, before its merger with Paris-based Publicis in 1988, Foote, Cone & Belding Communications was strong in the U.S., Latin America and Asia; Publicis had a strong European network, but no U.S. presence.
The merger trend has taken on many faces. It has, for example, extended to agencies targeting specific ethnic markets. Thus, Sosa, Bromley, Aguilar & Associates merged in late 1994 with Noble & Associados to create the largest Hispanic advertising agency in the U.S. The renamed Sosa, Aguilar, Noble & Associates had capitalized billings of $106 million. The rise of Internet advertising created another reason for mergers. In the U.S., for example, CKS Group merged with US Web at the end of 1998 to create US Web/CKS.
As the century drew to a close, three huge mergers narrowed the field of independent shops still further. First, Leo Burnett Co. merged with D'Arcy, Masius, Benton & Bowles to create Bcom3 Group. Then the venerable Young & Rubicam was acquired by WPP Group, and True North Communications, which already held Foote, Cone & Belding and Bozell & Jacobs, became part of Interpublic, making it the largest advertising organization in the world.
In 2002, Publicis acquired Bcom3, adding Burnett and D'Arcy to its network. Soon after the acquisition was finalized, the parent dissolved D'Arcy Masius Benton & Bowles, dividing its accounts and other assets among other units.