How Michael Roth turned IPG around

When he first took a gig with Interpublic Group of Cos. in the early 2000s, Michael Roth didn't think he'd stay all that long. The chairman and CEO of IPG, who first joined the holding company's board in 2002 and was tapped to take over the company three years later, was not an ad guy. He was part of a cleanup crew tasked with what he characterizes as "sort of a temporary responsibility" when IPG was in the throes of messy financial controls issues—sort of like advertising's answer to Harvey Keitel in "Pulp Fiction." For years, it looked like IPG might be on the brink of a sale. But things look very different these days. Today, IPG is smaller than its chief rivals in size—it's the world's fourth-largest agency holding company with $7.9 billion in 2017 worldwide revenue—but it's consistently outperforming its peers, analysts say. And its strategy of strong agency brands sharing scopes of client work appears to be paying off. In part, "they're not suffering the same pains of scale that WPP and Publicis and Omnicom are," says Forrester analyst Jay Pattisall. And as of Oct. 1, IPG officially owns Acxiom Marketing Solutions' business, for which it agreed to pay $2.3 billion in July—one of the biggest transactions in recent history for the agency space. Buying Acxiom, Roth hopes, will give IPG a huge strategic advantage. "The problem with this industry is there are too many people chasing the same revenue," Roth says. This acquisition, IPG hopes, gives it a leg up on that same revenue. The rise Roth, 72, was born and raised in Brooklyn, New York (first in Flatbush and then Sheepshead Bay), the son of an attorney and a bookkeeper. (He still has the accent, though these days his addresses are in Westchester, Manhattan and Florida.) "I didn't want to offend them. So I went to law school and I'm a CPA," he says. "I was weird as a kid. What I wanted to do was be a tax lawyer." Roth joined Coopers & Lybrand (which merged with Price Waterhouse to become PricewaterhouseCoopers) and became a partner there at age 30. Roth then joined Mony Group as CFO, eventually becoming CEO and chairman in 1994, and ultimately took the insurance company public. He left Mony in June 2004 following the sale of that company. Before he started on IPG's board, Roth knew next to nothing about advertising. He'd met a few people in the ad business and "they were all pretty cool guys—guys, by the way—and they did a lot of interesting things, they made a decent living. That's about the extent of what I knew," he says. In 2002, Roth was asked to sit on IPG's board as an independent member. He joined as a member of the audit and finance committees on the eve of IPG's darkest period. The company in August 2002 disclosed that it had uncovered errors in its accounting, setting the stage for a series of financial restatements, an SEC investigation and a multiyear effort to fix "material weaknesses" in IPG's internal controls over financial accounting. In 2003, Standard & Poor's downgraded IPG's corporate debt to speculative or junk status. IPG didn't climb back to an S&P investment-grade rating until 2015. The holding company found its financial footing under current CFO Frank Mergenthaler, who joined IPG in 2005, and Roth, who stepped into the CEO role at the board's behest that same year. He had been chairman since 2004. "Michael has a lot to learn, but it would be very wrong to pigeonhole him as a finance guy," one IPG agency executive told Ad Age at the time of Roth's CEO appointment. He also started rethinking the manner in which IPG had historically operated. "We did away with siloes and we used what we call here at IPG 'open architecture,'" he says. "The old way of thinking in this business was everyone competed with each other. Who cared about IPG?" To allow clients access to the entire holding company while still keeping the culture of individual agencies, he brought in new leaders for its global networks, ultimately replacing about 70 percent of the managers within the company, he estimates. "He took a fresh look at things because he hadn't grown up in an agency," says IPG board member David Thomas, who followed Roth from the Mony board. "Clients should be entitled to the best we have within IPG, not just the agency that they're working with," Roth says. "The notion of collaboration had to be basically taught and experienced by all agencies working together as opposed to competing." And agencies were held financially accountable for it. Roth says that McCann brings something different than FCB, something different than Mullen Lowe, and that UM brings something different than Initiative—and he credits IPG's success with not having everyone "just thrown together in a single, homogenized organization." However, most holding companies now have similar mechanisms in place. WPP has had "horizontality," a term recently retired by new WPP chief Mark Read, and Publicis has the "Power of One." "It's working in the marketplace," Roth said on a recent earnings call. "We didn't have to restructure our entire company and we've been doing this now for 12 to 13 years. And it's that culture coupled with talent that really resonates with our clients." Some see Roth as a different kind of leader than his competitors. Says Forrester's Pattisall of his Brooklyn roots, "There's a really smart, relatable sensibility that comes with that." Harris Diamond, chief executive of IPG's McCann Worldgroup, describes Roth as straightforward and transparent. "He's not Martin Sorrell, he's not Maurice Levy," says Pivotal Research senior analyst Brian Wieser about Roth's agency world experience. "But clients like him, people who work for him like him. He cares." Why Acxiom Roth has said the Acxiom deal marks the end of IPG ceding business to third-party companies because it couldn't provide the kind of in-depth data sophistication clients needed. "Nowadays, creative needs the same kind of insights that the media needs," Roth says. "So we're getting a huge amount of inquiries from our creative agencies to have access to Acxiom offerings." For Unilever CMO Keith Weed, the Acxiom aquisition means a strong addition to IPG's offerings. "This will help them step up in data-driven marketing, which is also, of course, a key focus for us at Unilever," he says. In the weeks after the deal was announced in early July, IPG and some of its peers reported second-quarter earnings. On calls for Omnicom and Publicis, analysts asked if they had considered buying Acxiom. Omnicom's response was that the holding company preferred to rent data versus buying the company compiling the data. Omnicom Digital CEO Jonathan Nelson said that position makes it more neutral and removes any perceived conflict it might have with its clients. But Roth says the deal doesn't affect IPG's neutrality. "That's nonsense," Roth says. "We welcome other third-party providers. If our clients want to use different third-party data analytics, we welcome that." IPG still has its own, called Amp. "There's absolutely no conflict here." What he says next is pure Roth: "If we didn't get the transaction, we would have announced very similar things to what our competitors were saying about why they didn't do it. OK? I'm not kidding. We actually had a press release on it. Because if we didn't get it, everyone was going to say, 'How come they got it and you didn't?'" Meanwhile, Roth claims not to be fazed by the encroachment of consultancies on the agencies. "We don't see them as often as you would think given the press they're getting," he says, though he adds they could be winning pieces of business without going through traditional agency reviews. As for the other holding companies, "when I meet with investors now, or even on the earnings call, the first question they ask is, 'Why are you doing better than everyone else?' And my response, partially tongue-in-cheek, is, 'We're better than everyone else.'" Tom Denford, who leads media consultancy ID Comms, says that from the media perspective, IPG's run in the last two years is more of a bounceback. The holding company will need to evolve its structure in the coming years, in Denford's view. Just as Dentsu's acquisition of a majority stake in Merkle helped it create a new center of gravity around data, he says, the Acxiom acquisition might be a good catalyst to evolve the structure of IPG's media group in the near future. "For them to remain competitive, they have to get a very clear narrative around the Acxiom business," and show that it gives them or their clients a competitive advantage, says Denford. Succession strategy The IPG of 2018 is quite a different picture than the one 16 years ago. Roth says when the holding company was obtaining financing for the Acxiom acquisition and needed to raise $2 billion, the demand for the debt was "off the charts." "There's an assumption out there that we'll be around," he says. But Roth is a realist. "When we were in 'trouble,' everyone thought we were going to be acquired. That occurred when our stock was at $10 a share, when it was at $12 a share, when it was at $15 a share. I took plenty of meetings with people who were interested in acquiring us. ... It was no secret." And he would still take those meetings, he says. As of press time, IPG's share price was $22.90. "So, I'm not resting on laurels ... but some of them can't afford us anymore, OK?" he says with a laugh. Roth sees the time since he took the reins as a slow build. "Slow, steady and invest, and at least have a strategy," he says. "I think our strategy has been totally consistent." On the heels of Sorrell's messy exit in the spring from WPP, the company he founded, succession is top of mind in the industry. Roth knows this. "Obviously I can't do this forever." He plays a lot of golf ("Not enough, or maybe too much"). He has three kids and eight grandchildren. (One owns a nut-free ice cream shop called A La Mode Shoppe on East 55th in Manhattan, not quite two blocks from Roth's office, so he likes to hang out there.) He says he takes the board through potential succession plans every year, to ensure IPG is not flat-footed "like some of our competitors." IPG has not publicly commented on Roth's successor, but Philippe Krakowsky, chief strategy and talent officer, and chairman and CEO of IPG Media- brands, looks like a likely contender. Krakowsky played a major role in the Acxiom deal and joined Roth in hosting a call for analysts and investors following the announcement. "When the time is right, I'll retire at the behest of the board and me, candidly," says Roth. "Is it 10 years from now? No. It's shorter than that, I can tell you that. I don't have 10 more years in me. But it's not tomorrow." — Contributing: Bradley Johnson

How Michael Roth turned IPG around

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