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'THE GLOVES ARE OFF' NEW SAATCHI AGENCY SPURS STAFF AND CLIENT DEFECTIONS, LAWSUITS

By Published on .

In an action-packed week of open warfare, Saatchi & Saatchi has turned into Saatchi vs. Saatchi.

Clients, staff, lawsuits and insults are flying between Saatchi & Saatchi Co. and the impudently named New Saatchi Agency that Maurice Saatchi announced Jan. 11.

"The gloves are off," said Edward Wax, chairman-CEO of Saatchi & Saatchi Advertising Worldwide.

The big question now is: How much damage can Maurice do?

So far, plenty. By Friday afternoon, accounts under review included the $350 million M&M/Mars business, the $135 million British Airways business and the $60 million U.K. Dixons' consumer electronics account. Another U.K. client, Mirror Group Newspapers, fired Saatchi, and Gillette U.K. was reported planning a review of the local Right Guard and Natrel deodorant brands. The agency's worldwide billings in 1993 were in excess of $5 billion.

Procter & Gamble Co., annoyed by speculation that it might contemplate a review, sent Saatchi a strong letter of support.

The other key question is how Mr. Saatchi, who doesn't even have an office yet, plans to handle international business-especially M&M/Mars and British Airways-if he wins the business.

Sir Tim Bell, the legendary U.K. public relations man who is representing Mr. Saatchi, said there will be an international capability including a U.S. office "in the early life" of the New Saatchi Agency. He said, however, it is "very unlikely" Mr. Saatchi will plug into an existing international network, saying Mr. Saatchi plans to use his "own personal money."

"He will create a world network," said Sir Tim. "If you do that once, you can do it twice."

Mr. Saatchi in December was ousted as chairman of the agency holding company he and his brother founded in 1970 after shareholders protested a lucrativestock option plan proposed for him. He rejected the board's offer of becoming chairman of Saatchi & Saatchi Advertising Worldwide.

Saatchi Chief Executive Charles Scott is expected to travel to the agency's New York offices this week to ask senior executives to sign a document pledging their loyalty to Saatchi & Saatchi. "He wants to bolster his legal argument in case they leave," an industry executive said.

With seven executives having already exited the agency since Mr. Saatchi's departure, rumors abounded that Saatchi & Saatchi North America Chairman Alan Bishop, 41, would be next. But Mr. Bishop dismissed such talk.

"It's absolutely untrue," he said.

Saatchi is hoping to block the new agency with a suit filed Jan. 12 in London's High Court against Mr. Saatchi and three top Saatchi executives who joined him.

In its suit, Saatchi is claiming damages for conspiracy to injure the company's business. The charges are leveled at Mr. Saatchi and Bill Muirhead, former chairman of Saatchi & Saatchi Advertising in North America; Jeremy Sinclair, acting chairman after Mr. Saatchi's ouster; and David Kershaw, chairman of Saatchi & Saatchi Advertising in the U.K. The suit also seeks to prevent Mr. Saatchi from soliciting Saatchi clients.

With masterful timing, Mr. Saatchi delivered almost daily body blows to Saatchi.

It is typical of the cunning planning of Maurice Saatchi's side that the defectors hired a top U.K. financial public relations company, Financial Dynamics, to manage their publicity. Even as Mr. Scott asked Messrs. Muirhead, Sinclair and Kershaw to briefly delay a public announcement so he could phone clients, their highly critical letters of resignation were faxed to the media Jan. 9. Two days later, Mr. Saatchi unveiled his new agency, British Airways announced its review and four more top Saatchi staffers in London quit.

Mr. Scott told analysts and investors in a teleconference, "The board took a long time to reach its conclusions because it was aware that Maurice might seek to damage the company if he were no longer chairman."

In London by the end of last week, previously mum Saatchi executives volunteered as much damaging information about Maurice as they could think of.

Wendy Smyth, Saatchi's finance director, said shareholders began losing confidence in Mr. Saatchi when he waged a "vitriolic" campaign against Mr. Scott last year, going so far as to employ a personal PR consultant, David Burnside, to help him smear Mr. Scott. Another time, she said, Mr. Saatchi tried to suppress a consultant's report to change the holding company name.

David Herro, the Harris Associates partner and Saatchi investor who led the rebellion against Mr. Saatchi, still thinks he made the right move. "In the end, events will prove the company is better off and, therefore, the investment is better off."

At least one Saatchi shareholder agrees. On Jan. 13, The Times newspaper in London published a letter from Keith Hall. "As one of the legion of `small shareholders,' I am sick of Maurice Saatchi's whining and bleating and also the apologists who seem to regard him as some kind of lost messiah," he wrote. "Maurice Saatchi has completely failed me, the shareholders and the company."

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