×

Once registered, you can:

  • - Read additional free articles each month
  • - Comment on articles and featured creative work
  • - Get our curated newsletters delivered to your inbox

By registering you agree to our privacy policy, terms & conditions and to receive occasional emails from Ad Age. You may unsubscribe at any time.

Are you a print subscriber? Activate your account.

IF YOU CAN'T BEAT 'EM, BUY 'EM IPG'S WESTERN DEAL MAY BE JUST THE START

By Published on .

NEW YORK-After Western International Media courted portions of important Interpublic clients like Coca-Cola and General Motors, Phil Geier decided not to let the No. 1 independent muscle in any further. Last week, for $50 million, Interpublic bought Western.

It was a dramatic sign that Madison Avenue is tacitly acknowledging the clout independents wield. The buy marks the first time in 25 years a major agency holding company has acquired a major media buyer, and it certainly won't be the last.

Interpublic Group of Cos.' acquisition of Western, with $1.6 billion in media billings, makes SFM Media the No. 1 independent. And Chairman-President Walter Staab isn't ruling out a sale of his company and its $800 million in billings.

"We're not 100% sure we'd enjoy working for somebody else," he said. "Having said that, we can see the advantages that will accrue to Western, and we'd be foolish not to entertain them."

To punctuate the importance of media buying services on U.S. marketing, Saatchi & Saatchi Co. announced two weeks ago it's establishing a unit of Zenith International to handle its agencies' U.S. buying.

Interpublic insists it won't combine the $4.5 billion in media billings for McCann-Erickson Worldwide, Ammirati & Puris/Lintas and Lowe & Partners/SMS. But if those buying units are merged with Western, as some believe will ultimately happen, a behemoth with billings well in excess of $6 billion will be created.

If that doesn't happen, Zenith will easily become the nation's largest media buyer, with billings of nearly $5 billion from Saatchi & Saatchi Advertising, Bates USA and Campbell Mithun Esty. The distant runner-up would be Young & Rubicam Advertising at $3.4 billion.

The trend toward major marketers going to independents for their buying accelerated in the late 1980s. In response, some major agencies established separate media units, while others opted to outsource media altogether.

Agency holding companies now control about 40% of the $150 billion in annual U.S. media billings. But independents have been making steady inroads, accounting for $4 billion to $5 billion of the total before the Western-IPG deal.

"IPG's acquisition of Western is only the beginning," said Abe Jones, managing director of AdMedia Corp. Advisors, New York. "Independent media services are ripe for consolidation. We think you may see large agencies acquiring independents; European media companies moving into the U.S.; and independents merging to become larger."

"If you can't beat them, buy them," said the head of another major independent. "Western was a constant threat to Interpublic, and Geier probably figured it would be cheaper to own them than to compete with them."

Indeed, Western almost wrested California spot buying for General Motors Corp. from McCann two years ago. IPG Chairman Geier saved the day, forming a joint McCann/Lintas GM buying group, but the compensation is believed to be unprofitable for Interpublic.

Western also is believed to have courted McCann's Coca-Cola Co. account after creative on Coca-Cola Classic shifted to Creative Artists Agency, Beverly Hills, Calif.

Mr. Geier went out of his way to stress he plans to keep Western's operation separate from media buying by Interpublic agencies in the U.S. and abroad. To help avoid the specter of conflict and to emphasize Western's autonomy, Interpublic Exec VP-Finance and Operations Gene Beard will oversee Western. Western Chairman Dennis Holt reports to Mr. Beard.

"If Western has a client that wants involvement in Europe and it makes sense that they be served through one of the agency's buying systems, fine," Mr. Geier said."But it doesn't make sense to put them together; it'll never make sense."

Commented Al Gottesman, PaineWebber analyst: "They're going to say `No' until such time as it happens."

Mr. Holt plans to use Interpublic's war chest to acquire other companies. "I want to get bigger," he said, noting international capabilities are crucial given most major media reviews require them.

Just how important, he knows first hand. Campbell Soup Co. is said to have queried Western for its media review but then cut it due to a lack of international resources. Previously, Mr. Holt had an informal affiliation with Carat overseas but that ends with the merger.

Agency holding companies have been a staple for years in Europe, including Saatchi's Zenith Media Worldwide and Interpublic's Lintas-owned Initiative Media and McCann's Universal Media.

One agency executive said just prior to the Interpublic deal, Saatchi was in talks with Western, looking to use it as a means to jump-start Zenith in the U.S. And Omnicom Group agency executives and others have talked this year, at least informally, with SFM.

Omnicom already holds a 9% stake in European media juggernaut Carat and has warrants to acquire an additional 4%.

Omnicom Chairman Bruce Crawford said his company has no plans to increase its Carat stake or acquire a U.S. independent buying service: "Unless we see strategic values to our agencies and clients [in the U.S.], we wouldn't be interested in making such a move."

Besides SFM, other likely independent targets are KSL ($300 million in billings); DeWitt Media ($400 million); Corinthian Media ($300 million); and Media Buying Services Inc., Time Buying Services Inc. and Horizon Media (each under $300 million). Management at SFM, KSL and DeWitt, the major targets, said they are not currently looking to sell.

It's hard to find many obvious conflicts in the deal since most of Western's business comes from servicing ad agencies. But Western's biggest direct client account is the $200 million-plus Walt Disney Co., a competitor of McCann's Columbia Pictures account.

"It's a concern," said Sid Ganis, president of marketing and distribution at Columbia. "But we've been assured by the agency that it's a complete and separate piece of business."

Most Popular
In this article: