NEW YORK (AdAge.com) -- In one of the largest mergers in the PR industry, Omnicom Group is combining the operations of U.S.-based Ketchum and its European sibling Pleon to create a global network intended to rival some of the industry's biggest global players, with more than 2,000 employees operating out of 103 offices in 66 countries.
Globally the new agency will operate as Ketchum but be called Ketchum Pleon in the U.K. and continental Europe. Current Ketchum CEO and senior partner Ray Kotcher will head up the agency globally, while Timo Sieg, former chairman and CEO of Pleon, will be the agency's European CEO and join Ketchum's worldwide executive board. The move makes Ketchum a nearly $400 million shop, bumping it into the neighborhood of some of the world's largest agencies, including Interpublic Group of Cos.' Weber Shandwick, Omnicom's Fleishman-Hillard, independent shop Edelman and WPP's Burson-Marsteller.
Lou Capozzi, president of the International Communications Consultancy Organization and former CEO of Publicis Groupe's MS&L, said he expects further consolidations like this to occur in the PR industry as the global networks form global partnerships with their clients.
"Agencies need to provide global coverage for their clients," Mr. Capozzi said. "That places a lot of pressure on the agencies to grow and expand their networks, so as these mega accounts grow in importance in major firms, I would expect to see more of this kind of consolidation. It's a smart move for Ketchum."
One European-based executive at a major agency said the agency never sees Pleon in global or regional pitches because it seems to have a "culture of 'local first,'" but said it's a good match for both agencies.
"Ketchum's strengths here are the same strengths they have in the U.S.," the executive said. "They are a very creative consumer- and tech-oriented agency, and that's all the stuff that Pleon is rubbish at. And Pleon are very good at local corporate.
It's a big management challenge, but on paper it looks clever and smart."
For Ketchum, which has a respectable presence in Spain and the U.K., not only does the merger give it a stronger global foothold, it makes the agency a major player in Germany, one of the world's largest economies and Pleon's strongest base of operations. For Pleon, whose only footprint in the U.S. was the work it did with other Omnicom agencies, the merger provides a significant a presence in stateside. The agency will also use Ketchum's offerings in Spain and the U.K., where its presence was minimal to nonexistent.
"This is about clients, and clients who need to be operating on a global basis, need competent communications counsel worldwide, and need extraordinary power on the ground regionally and locally," Mr. Kotcher told Ad Age. "We think we have a very good position in Europe, but Ketchum has had as part of a strategic plan now for a couple of years a plan to build out our global footprint, whether it's Asia, Europe or South America, and we need to make sure we are matching our clients' needs in all those parts of the world. This marriage is part of that plan to make sure we are providing our clients those services on a worldwide basis."
By tapping into Pleon's specialty of corporate work, Ketchum, well-known for its consumer and brand marketing, will now be able to offer its clients public-affairs, corporate, and change management and litigation and crisis counseling across Europe.
Securing market share
"Nearly 50% of Ketchum's client list is multi-geographical and multi-practice," Mr. Kotcher said. "So a new world of clients needing access to true global geographic representation is a reality for us."
Mr. Sieg said the merger has not resulted in any redundancies and there are no plans for layoffs. "This merger is future-related," he said. "We look at it in the long-term perspective. It's about growth and opportunities and definitely not about cost cutting. It's about being smart in difficult economic times to secure the position and market share. And that was the internal message as well."
Ketchum has been busy at looking to expand its global reach. In February it announced a partnership with Hakuhodo, one of Japan's largest marketing-communications firms. The agency, teaming with sister shop Fleishman-Hillard, also recently won the Philips global account, which was estimated to be in the $10 million to $20 million range.
The agency's clients include Best Buy, Ikea, Activision and Dr Pepper.