Then comes the really hard part, said analysts and executives familiar with BDDP. Though BDDP has some impressive clients and highly regarded personnel, it also has a debt load that has proven too much for two sets of owners to bear.
GGT will acquire that debt, about $83 million, and tack on another $30 million it has arranged to borrow to complete the purchase. To pay that off, GGT will have to get improved performance out of BDDP and its existing holdings-including Martin/Williams, Minneapolis, and GSD&M, Austin, Texas.
The sheer numbers involved in the transaction amazed some observers. In revenue, BDDP is more than twice GGT's size. GGT's debt load will increase from $22 million to $135 million. The true total purchase price, $250 million including the assumption of debt, is more than 40 times that of GGT's fiscal 1996 earnings of $6 million.
On top of that, internal political and cultural battles loom. Although BDDP President-CEO Jean-Claude Boulet said in announcing the deal that "everyone remains," BDDP Vice Chairman Jean-Michel Carlo told Advertising Age he is considering resigning.
"There's a long way to go before this is a done deal. GGT doesn't even know the full extent of BDDP's" liabilities, said one executive familiar with the French company's financials.
Still, others viewed the deal positively. "It's a bet on the people," said a GGT executive. "BDDP's financials have gone up and down, but management now appears pretty strong. With good people, the debt is less scary."
"I'm pretty pleased with it," said Lorna Tilbian, analyst at Panmure Gordon, London. BDDP `'is a perfect fit for [GGT]. They're bloody lucky the other [bidders] couldn't get their act together."
WPP, GREY BID LOW
Those other bidders included London-based WPP Group and New York-based Grey Advertising; neither showed tremendous enthusiasm for the deal or a willingness to pay a premium price.
Much of BDDP's debt stems from its 1990 purchase of Wells Rich Greene BDDP, New York, which today accounts for about 40% of BDDP's $200 million in revenue. It will become the linchpin in what GGT is calling a global network.
WRG performed below expectations for BDDP, but has been trying to engineer a turnaround under new leaders, including Chairman-CEO Frank Assumma and President Paula Forman. Last year, it earned a profit of about $5 million, executives close to the agency say.
WRG's biggest client, Procter & Gamble Co., signed off on the GGT deal in advance. Another major client, Ford Motor Co., also gave its blessing. But two executives close to Ford said they would be surprised if WRG stays on the automaker's roster longer than a year.
WRG recently won significant new business from another big client, Bristol-Myers Squibb Co..
WRG managers are thrilled by the deal. They feared a WPP or Grey takeover might have led to layoffs or even the demise of the WRG name.
Managers at Martin/Williams and GSD&M, GGT's primary current sources of revenue and profit, also expressed optimism.
`TRUE GLOBAL NETWORK'
"It gives us the opportunity to be a true global network," said Roy Spence, president of GSD&M (see story above).
Nearly all of GGT's revenue will now come from three countries instead of two, with France joining the U.S. and the U.K. And GGT's plan is to let BDDP operate autonomously, as it has done for years with Martin/Williams and GSD&M.
BDDP owners will have about a 25% stake in GGT after the deal closes. Walter Butler will become non-executive vice chairman of GGT and GGT's largest individual stockholder; he leads an investment group that acquired about one-third of BDDP several years ago when the network's founders needed help covering debt.
Contributing: Laura Petrecca, Laurel Wentz.