But when Lowe & Partners Worldwide took over ailing Ammirati Puris Lintas in the ad industry's biggest-ever merger 16 months ago, the message from Unilever was clear: You are our worst agency.
On Day One of this merger, the honeymoon was over, with more than one-third of the agency's New York billings prepared to walk if things didn't get fixed fast. Clients from Unilever to Johnson & Johnson to General Motors Corp. were fed up. Frank Lowe, chairman-CEO of Lowe Group and its Lowe Lintas & Partners Worldwide, had a problem.
The new management team has been struggling ever since to fix it--with mixed results. The agency had global billings of $6.5 billion at year-end 1999. (Figures for 2000 will be out in a few weeks.) Since the October 1999 merger, the agency has lost $1.23 billion in billings worldwide and gained $679 million in new billings, according to Credit Suisse First Boston estimates. Net loss: $551 million.
In the U.S., Lowe Lintas, from November 1999 to February 2001, lost an estimated $910 million in billings--nearly half the U.S. billings it had when the two agencies combined. It's gained an estimated $454 million during that period. Net U.S. billings loss: $456 million. The U.S. has been home to the agency's biggest losses--and biggest gains.
Now it appears the bleeding has stopped. Early on, that was no sure thing.
In the weeks after the October 1999 merger, Mr. FitzGerald met in London with Mr. Lowe and Philip Geier, then chairman-CEO of Lowe parent Interpublic Group of Cos.
"It's not good, Frank, I'm relying on you," Mr. FitzGerald told Mr. Lowe. Unilever's $1 billion-plus account--the largest at Lowe Lintas--was at risk.
Unilever executives found their agency's creative lackluster--and account service to be far worse. At a Unilever dinner in London around the time of the merger, Unilever executives privately snickered about the failings of Ammirati Puris Lintas.
Mr. Lowe went into damage control. Throughout 2000, he worked with everyone from Mr. FitzGerald and Global Advertising VP Michael Brockbank down to Unilever's brand teams to improve the account handling and creative work. To Unilever's delight, Adrian Holmes, Lowe's talented British worldwide creative director, personally took charge of Unilever's creative work.
But Unilever was far from the merged shop's only problem. Soon, Lowe Lintas top execs--almost all from the Lowe side--were reeling after hearing from a parade of neglected, fed-up clients that they were on the verge of being fired.
"The most difficult thing was the state of disarray at big APL clients," Mr. Lowe said in a recent interview. "I didn't know it was as bad as it was. I was shocked to find Unilever and Johnson & Johnson not very happy."
Crucial clients such as Johnson & Johnson, Lowe Lintas' second biggest worldwide client after Unilever, and GM, Interpublic's largest client, were deeply dissatisfied after years of management turmoil, earlier mergers and overnight strategy shifts at Ammirati Puris Lintas.
In New York, the merger was a disaster. Fully 30% of the New York office's business was under review by irate clients--some $700 million.
"We'd meet clients for the first time and they'd say `You've got four weeks,"' recalled one former agency executive. "The next day we'd visit another client and they'd say the same thing. The biggest issue was that we spent most of 2000 trying to retain big clients who didn't want to be there."
Eating dinner at Manhattan's Royalton hotel right after the deal was announced in October 1999, Lowe Lintas U.S. President Rob Quish pondered the deeply troubled relationships with U.S. clients Burger King, Dell Computer Corp., GM and United Parcel Service.
"If we keep two of these, it'll be a miracle," Mr. Quish told Gary Goldsmith, now the agency's U.S. chairman and chief creative officer. Mr. Quish knew both agencies, having jumped from an account post at Ammirati Puris Lintas to Lowe before the merger.
In the end, only Burger King bailed. Dell remained, while Johnson & Johnson, UPS and GM all put the agency on notice but ultimately stayed after a frantic year dedicated to rewinning shaky business.
In fact, Interpublic executives say the advertising company's revenue growth (excluding acquisitions) of 9% for 2000 would have been closer to 15% without Lowe Lintas' bad year and merger-related costs that last year totaled $165 million.
In 2000, Lowe Lintas globally lost clients worth $800 million in billings, of which about $550 million was in the U.S., estimated David McMurry, an analyst at Credit Suisse First Boston in New York. (Outside the U.S., the biggest loss was $150 million in GM business in Germany.) The agency won $415 million worldwide.
So far in 2001, Lowe Lintas has lost about $400 million worldwide, with a U.S. loss of $350 million after the exit of Burger King, and gained $235 million, Mr. McMurry said.
In the past month, the news has improved. Lowe Lintas' San Francisco office, once threatened with closure, won a reprieve with the $55 million Virgin Mobile USA account. MassMutual Financial Services Group, worth $20 million, also chose Lowe Lintas.
Best of all, Unilever invited the agency into a $300 million global food review prompted by last year's acquisition of Bestfoods. Knowing its chances were nearly nil, Lowe Lintas nevertheless went all out. A multinational team flown in from London, Paris and Milan rehearsed late into the evening before the Jan. 10 pitch on the New York agency's 38th floor, where the pitch room was transformed into "Frank's Bistro" to evoke both Mr. Lowe and a culinary mood.
To everyone's amazement, Lowe Lintas walked away with about $90 million in salad and other dressings business.
"We were last on the list," an elated Mr. Lowe said. "To win a major portion is a great compliment. I feel very bouncy!"
And the agency is deep in U.S. new business pitches worth a combined $400 million, Mr. Goldsmith said optimistically.
When Mr. Geier wanted to combine Ammirati Puris Lintas and Lowe & Partners to become truly global, Mr. Lowe wasn't sure it would work--even as he saw it as his best chance to become a major global player himself.
This wasn't Interpublic's first attempt to fashion a more global, more creative network. In fact, it was dejà vu all over again. Five years earlier, Interpublic bought Ammirati & Puris, a creative New York agency that was supposed to rejuvenate the floundering Lintas network with Martin Puris as chairman, CEO and chief creative officer.
Mr. Puris said that within five years he wanted the network to become one of the top five agencies in every major country. In fact, that never happened anywhere.
Seven creative directors, several major lost clients, a couple restructurings and one brief attempt to morph into a management consultancy later, Mr. Geier turned to Mr. Lowe.
Brilliant but unpredictable, Mr. Lowe had started his own London agency, Lowe Howard-Spink, back in 1981. Collett Dickenson Pearce, the agency he built into London's hottest shop in the 1970s as managing director, was never quite the same after he left. He gradually developed his own agency into a mainly European network that he sold to Interpublic in 1990.
Usually casually dressed in a sweater and fond of exhorting people that `the good is the enemy of the great' in his almost fanatical pursuit of high creative standards, he often seemed more like a creative than an agency head.
The year he chaired the International Advertising Festival jury in Cannes, he caused an uproar by withholding the coveted Grand Prix because he wasn't convinced any of the work was good enough. The festival never quite recovered from the trauma; every year the jury president has to promise to award a Grand Prix.
Mr. Lowe's passion for the last three years has been building Interpublic sports-marketing group Octagon, of which he is chairman-CEO. In 2000, with Lowe Lintas to worry about, too, he shuttled around the world on 136 different flights. A self-described worrier who is never satisfied, he devotes about one week in six to thinking, often from his second home in Swiss ski haven Gstaad.
Prompting the Ammirati-Lowe merger, Mr. Geier saw two of Interpublic's three networks losing the globalization race against the networks of WPP Group, Omnicom Group and Bcom3 Group.
At Interpublic, only McCann-Erickson Worldwide was a global player. Lintas was still much the same package-goods leviathan despite its misalliance with Ammirati. And Lowe was positioned as Interpublic's creative network but was handicapped by having offices in just 40 countries when global marketers were in more than 100.
"I said, `Look, we've got to solve this problem,"' said Mr. Geier, who retired at the end of 2000. "Long-term, we've got to have a real worldwide system that can compete."
By 1998, after Ammirati Puris Lintas lost $450 million in business from Compaq Computer Corp., MasterCard, Sara Lee media and Johnson & Johnson's Acuvue, the agency recruited former McKinsey & Co. partner Rick Hadala as chairman-CEO for North America and New York. It was the height of ad agencies' paranoia against the encroachment of management consultants, and Mr. Hadala was brought in to reinvent the agency to compete in a consultant-dominated world. The struggling New York office was to be the model for the future. His ruthless reorganization moved two-thirds of the agency's management into new posts in a month.
"The need to do this [consultancy] is absolutely there," Mr. Puris said at the time. "People always resist new ideas, [but] the ultimate answer is `Wait and see."'
He didn't wait long. In April 1999, the agency fired Mr. Hadala after just six contentious months. During that half-year, numerous senior-level executives quit or were forced out amid complaints about his fierce management style. Some said the move toward consulting was too abrupt for clients who were just looking for good ads.
"[Mr. Hadala] gave advice on all sorts of things [clients] didn't want to hear," said one former Ammirati Puris Lintas executive.
Mr. Puris cited "irreconcilable differences" in a statement, but Mr. Hadala filed suit against Interpublic, alleging breach of contract and defamation. The suit, later settled, claimed Mr. Hadala had a five-year employment deal and was let go without cause, and that the agency falsely told the public he resigned, which Mr. Hadala denied.
Meanwhile, Lowe & Partners/SMS had problems of its own in New York. The agency--created by a merger of Lowe and Scali, McCabe, Sloves--lost its flagship $125 million Mercedes-Benz USA account in February 1999. Interpublic accused former agency Chairman Marvin Sloves of steering the account from Lowe to Omnicom Group's Merkley Newman Harty while acting as a $650,000-a-year consultant to Interpublic. The American Arbitration Association rejected Interpublic's breach of contract claim in February 2000 as "unpersuasive" and "credibly contradicted" and awarded Mr. Sloves more than $1.3 million.
The Lowe and Ammirati Puris Lintas merger--essentially a takeover in which Lowe ended up with more than 70% of the executive positions in New York--was announced in October 1999. Mr. Puris left immediately, saying one merger was enough for a lifetime, and now runs Internet incubator New Things. He declined to be interviewed.
To run the new $6.5 billion Lowe Lintas network, the biggest unit of the $12 billion Lowe Group, Mr. Lowe became chairman-CEO and Michael Sennott was drafted as deputy chairman from McCann, where he was vice chairman. An urbane senior statesman, Mr. Sennott was prized for his experience with Interpublic and its clients. He added an American touch and, after two stints running McCann's European network from London, a Lowe executive said, "he felt like family."
Jerry Judge, Lowe's worldwide president, took on the same role at the new network and began spending half his time in New York, renting an apartment on the Upper West Side. Gregarious and popular, Mr. Judge is more likely to wear a black leather jacket than a suit.
"I think [New York] was the most difficult place because it was the product of a previous merger that hadn't particularly worked," he said. "There was scar tissue on scar tissue in New York."
Add to that little experience or even interest in running a global network with major multinational clients. "The managers of Ammirati & Puris were outstanding managers of a medium-size creative New York agency," Mr. Judge said. "It's like someone [tells] the brilliant manager of the New York Knicks overnight that [he's] going to manage the Brazilian World Cup [soccer] team. It's a different set of rules, a different game."
In New York, the new merger started another exodus.
"I saw the place unraveling," said one executive who left. "It's very much crisis management, from one account about to leave to another. This is a Greek tragedy."
Some accounts departed for conflict reasons: Denny's, American Home Products Corp.'s Robitussin, Unilever's Mentadent, and Sun Microsystems. Lowe Lintas juggled Dell Computer Corp. and the $100 million Sun account, hoping to finesse Sun from Lowe's San Francisco office to the Lowe-owned Martin Agency. That was doomed when Dell and Lowe Lintas' New York office took direct aim at Sun in a print ad last August headlined, "It's time to focus less on The Dot and more on The Commerce," a dig at Sun's theme, "We're the dot in .com." It didn't help that Dell's founder, Michael Dell, started talking about pushing harder into the server market and competing more directly with Sun. (Dell, meanwhile, now is reviewing its consolidated account; Lowe Lintas is in that review.)
KPMG, Goldman Sachs, Hoffman-La Roche's Xenical and Ameritech Corp. also left. In March 2000, Lowe closed its Chicago office after SBC Communications, parent company of the agency's biggest Chicago client Ameritech, decided to move the account to its own agency GSD&M in Austin, Texas.
The biggest blow was the not- unexpected loss of Burger King after an agonizing, drawn-out review that at least kept the account at Lowe Lintas and produced needed revenue through the end of 2000. (Burger King moved to McCann-Erickson, New York, and Campbell Mithun, Minneapolis, keeping the business inside Interpublic.)
Morale in New York was at rock bottom when Lowe and Ammirati Puris Lintas came together. Around the world, different countries had handled the merger in their own way. Clutching their passports, the two agencies' Dutch staffers were whisked away from wintry Amsterdam on a surprise flight to sunny Egypt. After sleeping in separate Bedouin camps in the desert, the two agencies were dispatched together on a strenuous all-day hike. They returned to a single camp, and spent the night drinking around a bonfire. The message: Two opposing camps could be merged into a single, interdependent team.
Not in New York. When Messrs. Lowe, Sennott and Goldsmith, along with U.S. Chairman-CEO and Chief Creative Officer Lee Garfinkel, went to Ammirati to address its top 100 staffers and reassure them about the merger, Mr. Lowe's talk of a takeover scared them so much that Messrs. Goldsmith and Garfinkel returned the next day to calm everyone down.
Similarly, at the agency Christmas party last December, Mr. Lowe in a rambling speech made derogatory remarks about Ammirati and Interpublic, while his driver stood next to him holding his ashtray. Mr. Judge finally took the microphone.
Throughout 2000, Lowe Lintas' top U.S. management team consisted of Mr. Garfinkel, Mr. Goldsmith and President Bruce Kelley. At the end of the year, Mr. Kelley was squeezed out of a job as most of his duties, such as responsibility for the defunct Chicago office, disappeared.
Mr. Garfinkel left in January 2001, after weeks of demoralizing speculation. He had joined Lowe in 1992, when it was a sleepy shop lacking the creative profile of Lowe's always-hot London agency. He put Lowe on New York's creative map, with work for Diet Coke, Mercedes-Benz and, most recently, Heineken. Lowe Lintas executives say they wanted him to stay, but in a more creatively focused role rather than running a 900-person New York agency. He is talking with Interpublic about backing him in a new agency.
With everyone else gone, Messrs. Goldsmith and Quish both moved up and the news leaked that Paul Hammersley, now the extremely successful young chief executive of Lowe Lintas' sizzling London agency, will move to New York later this year as U.S. CEO. Mr. Hammersley worked at Lowe in New York on multinational accounts and headed Lowe's international Coke business for three years before returning to London in 1997.
The move was foreshadowed by Interpublic Chairman-CEO John Dooner's remarks about bolstering Lowe Lintas's U.S. senior management in a recent conference call with analysts. "Europe was phenomenal and a reflection of the management over there," he said. "We appreciate management in New York for a good part of the year was not performing at a level we would have liked."
A corner was turned at a year-end review with Unilever. Lowe Lintas managers trooped to Rotterdam to see Mr. Brockbank, who congratulated the agency on going from Unilever's worst to joint best in a year.
A Unilever executive said the company was "surprised by the rapidity with which we noted an improvement, and that had a lot to do with the extreme determination of the new management."
There were kudos from other clients who had given the agency four weeks to shape up. Messrs. Goldsmith and Quish, for example, were in charge of wooing back disgruntled UPS, an old Ammirati & Puris client that already had endured one difficult agency merger.
"We said `UPS is a whole new company,' " Mr. Quish said. "It's about solving problems, not just delivering packages."
Lowe Lintas executives say UPS is pleased with a humorous new U.S. campaign that pokes fun at dot-coms and management consultants while highlighting UPS as an e-business partner. UPS didn't return calls seeking comment.
"There's a definite shift in the agency vibe here," Mr. Goldsmith said happily.
Lynn Myers, general manager of GM's Pontiac-GMC Division, was impressed by better understanding of her truck brand and less turnover on her account. "I couldn't be happier with the advertising," she said.
With angry clients pacified and restructuring done, Lowe Lintas managers insist they have set the stage for growth this year. One focus is on building global clients, like financial-services giant HSBC, that neither agency was in a position to do well on its own. With HSBC on the acquisition trail for banks around the world, new HSBC billings are rolling in. Lowe Lintas is handling, for instance, a new online banking and investment services joint venture between HSBC and Merrill Lynch that will operate worldwide except in the U.S.
"We were the biggest merger that's happened in the history of advertising," Mr. Judge said. But he says the merger's fallout is history. "Even at new business pitches, no one is talking about it. Now it's a completely new company."
Over the years, Lintas rolled up local agencies from London to Sao Paulo in a rarely successful effort to revitalize the stodgy package-goods purveyor. Once-respected creative agency Ammirati itself ended up subsumed by the agency it was supposed to save. One veteran Lintas watcher wondered if Lowe, too, would be "another log on the Lintas fire."
Not a chance, Lowe Lintas executives say. Said one top-ranking insider: "The curse of Lintas won't strike. Because we killed Lintas." Even if the Lintas name lives on.
Contributing: Jean Halliday, Laura Q. Hughes, Laura Petrecca and Suzanne Bidlake