Interpublic in talks to acquire Carmichael shop

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Interpublic Group of Cos. is said to be close to a deal to acquire Carmichael Lynch, a small Minneapolis shop with a solid creative reputation.

Executives at the holding company and the agency declined comment, but at least one person close to the talks said the two sides have been talking since October and are getting closer to an agreement. Financial details of the discussions could not be determined, but based on Carmichael Lynch's size, the price tag would be in the range of $15 million to $20 million.

STILL ACQUISITON-MINDED

Interpublic is expected to remain aggressively on the acquisition trail this year; nearly a third of its revenue growth came from acquisitions in each of the last two years.

In addition to Carmichael Lynch, Interpublic is also said to have its eye on Boston-based Hill, Holliday, Connors, Cosmopulos.

Executives at Hill Holliday and within the Interpublic family of companies said acquisition talks broke off two to three months ago after the parties couldn't agree on price.

But at least one Interpublic agency executive said the holding company is still interested in Hill Holliday. Referring to the two potential deals, the executive said, "There has been a lot of plane travel between Minneapolis, New York and Boston."

Interpublic is New York-based.

Hill Holliday has estimated billings of more than $500 million; its clients include Fidelity Investments and Bay Networks.

NEITHER DEAL A SURPRISE

Neither deal would be a surprise, said Jim Dougherty, an analyst with Prudential Securities, New York. Both agencies are in regions--New England and the Midwest--where Interpublic lacks a significant presence, he said, adding that acquisitions represent a major growth vehicle for the holding company.

Between 1996 and 1997, he said, Interpublic completed 22 acquisitions, adding annualized revenue growth of $145 million.

Acquisitions by Interpublic and rival holding company Omnicom Group are putting pressure on WPP Group, which is expected to drop from first place in revenue to third when 1997 results come out later this quarter.

Estimates for 1997 revenue place Omnicom and Interpublic at more than $3 billion in revenue each with WPP trailing at $2.9 billion, according to industry executives.

For Carmichael Lynch, a creative shop with approximately $200 million in billings and no international presence, a linkup with Interpublic would allow for international accounts and expansion.

The 35-year-old agency is currently owned by its staff through an Employee Stock Ownership Plan.

Carmichael Lynch's clients include Harley-Davidson Motor Co., Mack Trucks and Boston Beer Co.'s Samuel Adams beer.

MIDWESTERN WEAKNESS

Interpublic agencies have had a weakness in the Midwest, underscored by Ammirati Puris Lintas' need to open a Chicago office late last year to service its Ameritech Corp. creative account. Interpublic does own Minneapolis-based Campbell Mithun Esty but has had no general advertising presence in the Chicago market since 1982.

Industry observers speculated the most likely candidates to benefit from a Carmichael Lynch acquisition would be Interpublic's Lowe Group--which has no presence in the Midwest--or Chicago-based Draft Worldwide, on an expansion campaign of its own since joining Interpublic in 1996. Draft Worldwide Chairman-CEO Howard Draft said his agency was not in talks with Carmichael Lynch.

Copyright January 1998, Crain Communications Inc.

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