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Interpublic, HM&P Bickering Offers Rare Glimpse at Internal Tensions

By Published on .

NEW YORK (AdAge.com) -- Last Tuesday, Raleigh-based ad agency Howard Merrell & Partners thought it had a winning ticket. The regional shop had just triumphed in a hotly contested pitch for the North Carolina Education Lottery, a win that was trumpeted in an Associated Press story touting the “clever ads” it presented.
Just days after it won the $8 million review, HM&P asked to be removed from consideration because parent company Interpublic declined to post a $1 million bond that’s required to ensure vendors are paid.

Interpublic blamed
A week later, it seems the numbers were all wrong. Not only has the account shifted to one of HM&P’s competitors, but the agency managed to tick off its owner, the Interpublic Group of Cos., with a statement that could be construed as blaming the loss on the holding company’s financial issues.

Out of a little squabble comes a rare glimpse into holding company/ad agency tensions. Agency owners privately enjoy second-guessing their holding-company masters about as much as baseball fans do the home-team’s managers, but it’s a pastime that’s rarely, if ever, indulged in public. This press release back-and-forth, however, is an exception.

Bond denied
Just days after it won the $8 million review, HM&P asked to be removed from consideration because Interpublic declined to post a $1 million bond that’s required to ensure vendors are paid. After it was notified of Interpublic’s decision, the North Carolina lottery announced it had chosen another finalist, independent Wray Ward Laseter, in a press release that made no mention of the reason for HM&P’s withdrawal.

The North Carolina lottery, established last year, has been a hot-button issue within the state and the subject of much local news coverage, so HM&P sought to clarify. “The lottery’s statement didn’t say why we had to withdraw,” agency spokeswoman Stephanie Styons said in an interview.

In response, HM&P put out a rather dejected statement that read in part: Interpublic “has issues meeting the bond requirements for HM&P. IPG could not resolve the issues in a timely fashion. As a result, IPG advised HM&P to withdraw from consideration. And, we have. The entire staff at HM&P is extremely disappointed. We put a lot of time an effort into the bidding process, and we were looking forward to working with the [lottery].”

Then, Interpublic sought its own clarification. After all, the implication that it couldn’t make the bond was not a good thing for the holding company -- especially in the wake of last year’s financial restatement, which led both Standard and Poor’s and Moody’s to downgrade its debt rating,

Interpublic fired back with a release that didn’t identify HM&P by name but instead referred to it as “one of our smaller agencies.” It read: “Our decision had absolutely nothing do with our ability to secure this $1 million bond, an inconsequential amount in the context of our company’s financial capacity. Instead, our decision was based on strategic considerations.”

An executive familiar with the companies said the rather elliptical phrase “strategic considerations” likely has to do with making such a financial commitment to an agency that’s worth less than $2 million in revenue and is a “non-strategic asset.”

An Interpublic spokesman declined to comment beyond the statement.

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