NEW YORK (AdAge.com) -- New York-based digital agency Deep Focus has been snapped up by Engine USA in what is expected to be the first of many deals for the stateside outpost of the U.K.'s Engine Group.
Terms of the deal were not disclosed. Engine does not use an earn-out structure, meaning that owners of any agency they acquire are granted 100% upfront cash and stock in the company. Deep Focus had $8.2 million in revenue in 2009, down 4% from the year prior, according to Ad Age DataCenter. The 8-year-old agency counts Microsoft, Nintendo and Diageo as clients.
Deep Focus is Engine USA's first acquisition and the initial step in the group's plan to re-create the Engine London model in New York. The strategy is to build an agency company under one roof, made up of several shops, each with their own specialty. However, unlike a typical holding-company model, there's only one of everything, not overlapping PR shops or two direct shops, for example. After five years, London-based Engine is made up of 14 agencies and 600 employees and had $95 million in revenue for 2009.
"The essentials of the Engine concept is a collaborative environment, with all partner companies, all partners [owning] the same stock, one building and no internal competition," said Martin Puris, Engine USA CEO.
"Seeing how earn-outs have worked among my peers, the founders don't just leave, they run," said Deep Focus CEO Ian Schafer. "That's not what I wanted to do and, in that sense, found a pretty good home here."
The U.S. outfit marks Engine's first operation abroad. It was established early this year with two old-school admen at its helm: Mr. Puris, former co-founder-chairman of Ammirati & Puris, and Engine Chief Operating Officer John Bernbach, former president-COO of DDB Needham Worldwide, which merged to form Omnicom Group.
Earlier this month, Engine received $100 million over two years from global firm HIG Capital. The investment will fund growth in the U.S. as well as China, Brazil and other European markets.
Deep Focus made sense as the first piece in the U.S. because "digital has to be at the heart of any agency today," said Mr. Puris. Next up are 10 to 12 shops each on a specific discipline, ranging in function from design to public relations and direct response.
"We're taking our time," said Mr. Puris. "We're really looking first for quality people and quality product as opposed to rushing to fill categories. Over time, we will fill the missing parts."
Though, the "in one building" piece could prove difficult. That would require Engine targets to be primarily based in New York, a market already ripe with acquisition.
"We think we will be New York-centric, though [we] are not excluding something elsewhere if it's the right fit," said Mr. Puris. "But being in one place is really central to the concept, and there are a lot of good things available."
Palazzo Advisory Acquisition was Engine's adviser for this transaction, while the Jordan Edmiston Group consulted Deep Focus.