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Interpublic Merges FCB and Draft

Howard Draft Named Chairman-CEO of New Unit

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NEW YORK (AdAge.com) -- Interpublic Group of Cos. has finalized plans to merge two of its largest units, the marketing-services agency Draft and traditional ad agency FCB, according to the company.
Howard Draft will run the newly merged Draft FCB Group.
Howard Draft will run the newly merged Draft FCB Group.

Steve Blamer to leave
The combined unit will be called the Draft FCB Group, with Howard Draft, founder and CEO of his eponymous agency, as the new unit's chairman-CEO. Steve Blamer, who last year took the reins of FCB, is leaving the company following a transitional period. FCB's worldwide creative chief, Jonathan Harries, will be worldwide chief creative officer. The unit will have a single profit-and-loss statement.

The widely expected move by the struggling ad agency holding company is a bid to create a new offering on the agency landscape, one that combines the behaviorally driven focus of Draft, known for its direct-marketing and promotions expertise, with one of the ad industry's oldest giants. It marks the end of a 133-year journey for FCB as a stand-alone brand and is another sign of the ascension of a long-marginalized part of the marketing business.

The success of the Draft FCB union is crucial to Interpublic's future, as the No. 3 holding company tries to emerge from years of financial and operational difficulties. Interpublic maintains that this move is not cost-driven, though many insiders doubt the company's claims that it's not attempting to strap a poorly performing asset to the back of a thriving one.

FCB's struggles
FCB, though known to be a well-run agency from a financial perspective, has struggled to modernize its brand in recent years. The agency network's image should be given a shot in arm by being associated with Draft's growing profile, which has been buoyed by advertisers' increased interest in measurable marketing programs. At the same time, FCB's global network, an inconsistent mix of hotshops -- like its offices in Brazil and India -- and laggard offices gives it well more than 100 dots on the map, something that should jolt Draft's slow attempts to grow internationally.

The discussions have sparked concern within Interpublic's ranks, given its trouble with past agency mergers that have caused client defections. Following this announcement, for instance, all eyes are sure to be on telecom giants Motorola and Nokia, both of which have relationships with the merged agencies. (Nokia works with Draft and Motorola with FCBi, the agency's interactive arm.)

If the merger works, Interpublic could finally get a marketing-services powerhouse to take some of the load off McCann Worldgroup, now said to be responsible for half of Interpublic's revenue. If it doesn't, it could leave Interpublic with another post-merger mess.

Integration teams
To facilitate the merger, expected to be fully implemented within six to 12 months, each agency is creating integrations teams that report to a committee led by Mr. Harries and Draft's president and chief operating officer, Laurence Boschetto. Those teams will be responsible for planning geographic marketing alignment, client offerings and as well as finance and operations.

The committee's work is expected to be completed within 90 days, at which time the new organizational and management structure will be announced.

Messrs. Harries and Boschetto report to a transition board comprised of Mr. Draft, Interpublic Exec VP-Chief Financial Officer Frank Mergenthaler, and Interpublic Exec VP-Strategy Philippe Krakowsky.
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