True North Communications is in discussions to purchase a stake in Don Coleman Advertising, as the wave of global agency networks seeking minority shops swells.
The talks involving Southfield, Mich.-based Coleman, the country's third-largest African-American agency, come on the heels of Publicis' deal last week to buy 49% of Burrell Communications Group, Chicago, the largest U.S. agency in the segment with $21.8 million in revenue. No. 2-ranked UniWorld Group is in negotiations with Young & Rubicam and possibly others.
HISPANIC AGENCY NEXT FOR PUBLICIS
Publicis Chairman-CEO Maurice Levy told Advertising Age he isn't satisfied with buying only Burrell: He also wants a deal with a U.S. Hispanic agency this year.
But the most voracious appetite among large networks so far has been for African-American agencies.
"Now that the No. 1 agency is not available, the race for No. 2 and No. 3 will intensify," said Sharing: UniWorld, led by Chairman Byron Lewis Sr., and Y&R share clients.
Ken Smikle, president of Target Market News. "Even for agencies that don't form some kind of relationship, the pressure is going to be on them to prove that they can be just as competitive and just as smart on marketing to African-Americans."
Coleman, with 1998 billings of $137 million, did not return calls. True North, which already has a minority interest in Stedman Graham & Partners, an ethnic agency in Chicago, refused to comment.
3RD SIGNIFICANT U.S. INVESTMENT
The deal for Burrell, with $166 million in billings in '98, marks Paris-based Publicis' third significant U.S. investment in the past year, after Hal Riney & Partners, San Francisco, and EvansGroup, Seattle.
Terms were not disclosed, but an industry generality is that agencies can go for 1.5 times revenue, which in Burrell's case would equate to $32.7 million.
In targeting Burrell, Publicis is reaching out to a burgeoning market that's expected to remain the country's largest minority group through 2005, after which Hispanics should surpass them.
Blacks' buying power is one powerful motive, but it's their influence that must be reckoned with in everything from clothing and music to sports and dance, said Mr. Levy.
"Burrell has a lot of findings that can help them pre-empting the trends of the future," said Mr. Levy.
He added: "If we do wish to be considered in the U.S. marketplace as a major player, we have to offer to our clients the whole range of services, so therefore we need a minority . . . specifically targeted agency."
BOTH SIDES WIN
For minority shops, such deals offer access to larger, often blue-chip clients via a parent with global reach, while the acquiring network gets built-in ethnic advertising expertise.
UniWorld Chairman Byron Lewis Sr. didn't return calls about the status of the Y&R talks. The two agencies share several key clients, including AT&T Corp., Colgate-Palmolive Co. and Ford Motor Co.
Y&R also wouldn't comment.
The current action follows an earlier round of smaller minority/mainstream unions. In 1996, DDB Worldwide joined with black filmmaker Spike Lee to form Spike/DDB, New York; True North's Bozell Worldwide teamed with Graham that same year, and Leo Burnett Co. set up Vigilante, New York, two years ago.
Such marriages are not without controversy, however.
"[Some people feel] if you're not all black, then you're too white," said Caroline Jones, president and creative director of the New York shop that bears her name. She said resentment has lessened but still exists.
SALE COULD CLEAR WAY FOR MORE
But backlash may become even less of a problem with the Burrell sale, speculated Bob Huntington, managing director of AdMedia Partners, which brokered the Publicis deal. He said a move by the country's largest minority shop "almost gives license to . . . their competitors" to talk to big agencies.
Burrell founder Tom Burrell said mergers are a prime way to improve positioning.
"If you are looking to be a major player out there, you can't do it on your own, whether you're black or white," he said. "That's why agencies are doing deals. There are agencies out there far greater and far whiter than we are that are combining with major advertising agencies."
Ms. Jones said global ad organizations long tried to ignore the black consumer market--or treat blacks as if they were the same as Caucasians. She and others say the agencies no longer can afford that as their clients try to grab some of the estimated $450 billion spent by blacks in the U.S. each year.
BLACKS WANT INVITATION
"Black consumers want to see themselves in advertisements; they want to know they are being invited to select a product, and they no longer are willing to be taken for granted," Ms. Jones said.
Ms. Jones and Gene Morris, owner and president-CEO of Chicago's E. Morris Communications, both said they had been approached by large agencies but were not negotiating with anyone now. Messrs. Morris and Huntington, however, said they expect to see more mergers or joint ventures."If you're not paying attention to blacks or Hispanics, it's almost like you're committing marketing suicide," Mr. Morris said.
Copyright June 1999, Crain Communications Inc.