Ever since $558 million Snyder Communications acquired Arnold Communications, Boston, last March, the kibitzy ad world has been taking bets on what Snyder will scoop up next.
Not that Mr. Snyder, chairman-CEO, would admit that he covets the above-named ad shops. The agencies declined comment on such acquisition speculation. Mr. Snyder would say only, "We've talked to a lot of players."
RAISING ITS PROFILE
For all the fervor that surrounds Mr. Snyder's company these days, one thing is clear: Snyder Communications is raising its profile within the ad agency circuit. What was once considered a no-name direct marketing company is now generating a stir.
The latest rumor buzzing about: Snyder is in negotiations with a small San Francisco agency, reportedly to bulk up Arnold's menu of offerings.
If and when the deal is closed, the agency would join a long list of Snyder acquisitions. Just three weeks ago, Snyder bought Response Marketing Group, an interactive shop, for $52 million. In September, it purchased MKM Marketing, a German pharmaceutical marketing company, for $58 million. That's on top of the 10 other acquisitions Snyder made in the past year.
That's enough to get the glitterati of Madison Avenue whispering. But what exactly is Snyder Communications? In short, it's a company that built itself on successfully targeting various consumer demographics for such blue-chip clients as Pfizer, Kimberly-Clark Corp. and IBM Corp. Now, Snyder wants to create one-stop-shopping for them.
For Pfizer, for example, Snyder would provide training, research and possibly even help sell a new drug to pharmacists and doctors. For K-C, it would distribute sacks filled with Huggies diapers and other baby products to new mothers. For IBM, it would manage databases, taking note of the preferences of the computer company's customers.
In all, Snyder services currently reach more than 70 million consumers a year. But when its clients wanted to take their message directly to the consumer through advertising, Snyder would have to step aside as the likes of Ogilvy & Mather Worldwide and Campbell Mithun Esty snatched up billings.
Until Arnold. In March, with the $120 million purchase of Arnold, the company took its first step into traditional advertising. That provided Snyder with extensive creative capabilities and the power to take its clients' messages full circle.
"We got a snapshot [of Snyder] and said, `Wow,' this is so real, fast-growing and substantial that we'd be crazy not to consider them," recalled Arnold Managing Partner Fran Kelly. "They have the money, synergies and contacts to help us grow."
EXPANDING GLOBAL REACH
Indeed, Snyder plans to use those assets to expand Arnold's global reach. Mr. Snyder said he hopes to acquire a European agency to complement Arnold by yearend.
These days, with revenues growing exponentially, international expansion doesn't seem far from Snyder's future. Over the past two years, the company has posted record sales and profits. This year, revenues are expected to rise by 33% to $740 million, according to analyst estimates. Net income, which grew 125% in the third quarter alone, is expected to more than double year over year, to $65 million for full-year 1998.
Analyst Alexia Quadrani of Bear, Stearns & Co. predicts revenues will continue to rise at a rapid clip, growing at an annualized 30% rate over the next three to five years, as earnings climb 35%.
"This company has very strong management," said Ms. Quadrani. "It's focused on high-growth segments of the market."
Colleagues and business contacts alike attribute the company's growth to Mr. Snyder's dauntless drive.
"From the time I first met him until the time we did a deal, it was four weeks," said Ed Eskandarian, Arnold's chairman-CEO. "He makes a decision and acts on it."
THE KEY TO SUCCESS
Mr. Snyder's vision shaped Snyder Communications even before its inception. In 1987, a 22-year-old Mr. Snyder urged his older sister to shelve her architecture degree and join him in a fledgling business venture. Instead of breaking ground for buildings, Michele Snyder broke ground in the publishing business with her brother.
"I said to him, `I'll give you a couple of years -- it's been 12," said Ms. Snyder, now Snyder Communications' president-chief operating officer.
"Dan's one of the most assertive people I've ever met," she added, "That's one of the keys to our success. He doesn't take no for an answer."
The duo formed Collegiate Marketing & Communications and began cold-calling on companies in a quest to secure seed money for their student-targeted magazine, CampusUSA.
"Dan just went out there and knocked on a lot of different doors," said Ms. Snyder.
After a multitude of calls, Mr. Snyder hit upon a company that would hear him out: U.S. News & World Report LP. Looking to target the youth market, U.S. News owner Mort Zuckerman and his top lieutenant Fred Drasner were willing to consider Mr. Snyder's business proposal.
Posing as a more mature 25-year-old, the then 23-year-old Mr. Snyder talked the media moguls into investing more than $3 million in his neophyte company.
Messrs. Zuckerman and Drasner said Mr. Snyder's tireless ambition gave them the confidence to back the venture.
"He'd call me from three different cities after seven different meetings," said Mr. Drasner. "He was working seven days a week, around the clock."
But his energy was not enough to sustain interest in CampusUSA. Clients "liked the targeting but not the magazine," said Mr. Snyder. So "we just listened [to them] and responded."
Mr. Snyder changed direction, diversifying from publishing into niche marketing. Collegiate Marketing & Communications was rechristened Snyder Communications in 1989.
Over the next few years, Snyder expanded its services to offer direct mail, medical marketing, database management, telemarketing and sampling. Early clients included Gillette Co., Kellogg Co. and the U.S. Coast Guard.
In September 1996, Snyder went public, making the then 31-year-old Mr. Snyder one of the youngest men to be listed on the New York Stock Exchange.
Initial investors included Messrs. Zuckerman and Drasner, TV maverick Barry Diller, public relations mogul Robert Marston and former Donaldson, Lufkin & Jenrette principal Dan Lufkin.
`THIS GUY WAS A STAR'
"Many of us went into this by virtue of his reputation," said Mr. Marston, who has never met Mr. Snyder. "All I heard from the people managing the private placement was that this guy was a star."
A shooting star, based on the company's performance. The stock, which originally opened at $17 a share, more than tripled to a high of $54.25 in April. The company's price-to-earnings ratio on 1999 earnings hovered in the 40 to 60 range. Yet, analysts who cover the stock still rated it a buy. That's because some valued the company as a consolidator due to its rapid acquisition rate. Such companies typically are valued in line with their growth rates.
These days, even with market fluctuations, the stock is holding its own; it was recently priced at about $35 a share. Now, the P/E ratio is about 24 times 1999 earnings, according to First Call, which provides consensus estimates from analysts who follow the stock. That's roughly in line with the Standard & Poor's 500, which currently trades at 23 times forward earnings.
Said Ms. Quadrani: "The stock is currently trading at a discount to its long-term growth rate."
INTO THE SPOTLIGHT
As the company continues to expand, its founder is being pushed into the spotlight. Still, Mr. Snyder avoids self-promotion.
"I don't do cocktail parties in New York City," said the native New Yorker. "I let my agencies do that."
He deflects personal questions, only revealing the smallest details about his private life, which includes a wife and two young daughters. Although he's an avid reader of biographies, he shudders at the prospect of having one written about him.
While Mr. Snyder avoids getting personal, he expounds like a proud father when detailing his latest acquisitions. He also verges on boasting in describing his employees and business associates.
"We've got a who's who on the board level," said Mr. Snyder referring to the likes of Messrs. Zuckerman and Drasner as well as Phil Guarascio, General Motors Corp.'s general manager-group VP-marketing and advertising for North American Operations.
He also is proud of the "cross-selling" of client services that has bolstered his shops' billings. In August, Snyder's Blau Marketing Technologies subsidiary nabbed the retail, commercial banking and credit card portion of Fleet Financial Group's $100 million direct account. Blau's edge: It had additional client insight from Fleet's general agency, Arnold.
Blau also leveraged knowledge from its sister pharmaceutical marketing shops to win the $50 million direct marketing account of Merck & Co. this summer.
IS IT TOO MUCH?
That's the kind of synergy Mr. Snyder said he looks for in making new purchases. Yet analysts caution that there is a possibility his company may bite off more than it can chew.
"The challenges are in managing and integrating the companies they are acquiring," said analyst Fran Blechman Bernstein of Merrill Lynch & Co.
Others say Mr. Snyder's method of payment -- stock -- is a deterrent to some shops. One independent agency executive said he'd hesitate about joining Mr. Snyder's roster of holdings through a stock deal since the market is so unpredictable.
"It's the kind of operation that makes me nervous," said the executive. "They keep buying things with stock. It's like a paper house."
Yet that stock, company executives point out, has doubled in two years. Ms. Bernstein predicts the stock price will rise to $49 in the next 12 months. In addition, Mr. Snyder said he has a built-in plan to diversify revenues. No single client makes up more than 7% of sales.
This year, creative services -- as Snyder defines the advertising portion of the business -- will make up 12% of the $740 million in projected revenue.
"We used to be considered odd," said Mr. Snyder, referring to his original niche marketing strategy. "Now we're considered normal. The future of marketing is moving so fast the traditionals won't have a chance over the long term. The big agencies are going to be forced to change. They are struggling to move out of their core competencies." For some agencies, Mr. Snyder may be that instrument of change.