MacManus Group merger. Though it won't happen right away, a combined Starcom Worldwide and MediaVest Worldwide more than likely will soon challenge the media properties of rival agency holding companies and Carat Group for global pre-eminence.
"While at this point in time no decision has been made on how we will structure the media assets of [what will be temporarily called] BDM," said Bob Brennan, Starcom's chief operating officer, "after collaborating with our counterparts at MediaVest it's likely that in many markets we will form a single operation."
The executive noted that in some markets, "we will need to retain separate operating entities."
Client conflicts are part of the reason for staying separate in certain markets, such as the U.S. For example, Starcom does kids buying for McDonald's Corp. while MediaVest handles Burger King Corp. Starcom has the accounting firm of Arthur Andersen; MediaVest has Ernst & Young.
"Could [the merger] be a problem?" asked Robert Duboff, director of marketing for the North American operations at Ernst & Young. "It could. Is it a problem now? Not as they're describing [the merger] now."
If the two media units were totally integrated, he noted, problems could arise over strategic issues. Furthermore, if Starcom and MediaVest fully merged in the U.S., Ernst & Young would have to look very closely at how media buys are handled and whether Andersen was getting a better deal, Mr. Duboff said.
There's no question that combining certain functions, such as research, is not only cost-effective but makes a combined entity stronger than if the two remain separate.
"Globally, because of the merger of the two companies, we will be able to drive a superior level of investment in the best-trained professionals, best systems and best research," Mr. Brennan said.
REVENUE NEARLY EQUAL
Domestically, Starcom had billings of $2.9 billion last year. MediaVest, strengthened by its $1 billion in Procter & Gamble Co. TV buying, checks in at $2.5 billion, making it the No. 1 ranked U.S. TV buyer. Starcom, led by its multimillion-dollar P&G assignment as print agency of record, is the largest single buyer of print media space in the U.S.
MediaVest and Starcom also rank No. 1 and No. 2, respectively, in the buying of syndicated TV fare, and No. 3 and No. 4, respectively, in cable TV buying.
Starcom Chairman Jack Klues is expected to head up a merged, worldwide media operation. Mike Moore, chairman-CEO of MediaVest, had retired when, earlier this year, then-MediaVest President Irwin Gotlieb defected to WPP Group's MindShare; Mr. Moore was recruited to return. However, he's likely to leave when the merger is finalized.
WHY EARLIER TALKS FAILED
A year ago, MediaVest and Starcom were close to being merged by the two parents. One reason those talks fell apart was control issues between Messrs. Gotlieb and Klues, executives close to the situation said at the time. With Mr. Gotlieb no longer at MediaVest, those issues have evaporated.
Also, at the time, it was said that the media alliance was a prelude to a full Burnett/MacManus merger which itself fell apart because MacManus Chairman Roy Bostock and Leo Group Chairman Rick Fizdale didn't get along.
If true, that issue also became moot when Roger Haupt was tapped as CEO of Leo Group effective Jan. 1.