LONDON (AdAge.com) -- Interpublic Group has paid $40 million in cash for London agency Delaney Lund Knox Warren, and will merge the agency with Lowe London to form DLKW Lowe.
The move is a bid to boost Lowe's presence in the U.K. and give credibility to the struggling London office's role as the network's European hub.
Lowe London has had difficulty retaining local clients, and last year lost Unilever's Peperami to a crowdsourcing experiment, and department store John Lewis to a rival agency. The $70 million Tesco account, a bedrock of the agency for decades, followed the Lowe staff who defected to start their own agency, The Red Brick Road, with the original Lowe founder, Frank Lowe, in 2006.
"[DLKW] was always a difficult agency to pitch against because of the cohesiveness, strength and culture of the management team," said Tony Wright, chairman of Lowe Worldwide. "They have a good retention record with people and clients, and given Lowe London's tumultuous history, this is important to us. We wanted a grown-up approach to the business, and DLKW was looking to move into the international arena, so our interests are aligned."
IPG has supported two other recent acquisitions for the Lowe network: It funded the acquisition of Borghierh in Brazil to create Borghierh/Lowe, and also paid for the agency to buy out the remainder of Lowe Lintas in India. In the U.S., IPG merged Lowe's operations with another of its agencies, Deutsch, last year.
However, Mr. Wright said, "The focus is not on running around the world and buying things -- this is not an acquisition-based turnaround -- but there may be other things out there where it makes sense."
DLKW's management team -- chairman and chief creative Greg Delaney and joint CEOs Tom Knox and Richard Warren -- will run the London office as well as get involved with international business. They will also take an undisclosed "minority investment" in the new combined entity.
The deal does not appear to throw up any client conflict. Lowe London's clients include AEG, Unilever, Electrolux, Johnson & Johnson, General Motors and Zanussi.
DLKW is a full-service agency whose clients include Burger King, SAB Miller, General Motors' Opal and Vauxhall marques, Morrissons supermarkets, and a number of government accounts including the Department of Health and Revenue & Customs. It also works with Lloyds TSB bank and Mirror Group Newspapers.
According to The Nielsen Company, DLKW is the 10th biggest agency in the U.K., with billings of $280 million in 2009. Lowe is number 26 in the same table, with billings of $80 million.
The deal was put together by Lowe's London-based worldwide CEO, Michael Wall, who emphasized the importance of strengthening Lowe's London office in its network. "Lowe is the only multinational network headquartered in London, and the U.K. needs to be strong not only for economic reasons, but also it's important for our reputation and for attracting talent," he said.
DLKW was previously owned by U.K.-based Creston Group, which bought the agency in 2005 and owns a clutch of communications, market research and health-care agencies. The sale will allow Creston to pay off nearly all of its debts and is expected to be approved by shareholders on 13th July.