By Published on .

PARIS-As negotiations drag on between NW Ayer in the U.S. and its European agencies on how to separate, the Ayer Europe network has a big complication here.

Ayer's main French agency, MGTB Ayer, is hopelessly in debt, and Ayer Europe must decide whether to sell MGTB, leaving a gaping hole in a network that desperately needs more European clients, or struggle with the debt.

Since Sept. 15, Ayer France has been under the control of a court-appointed observer, which must approve all transactions.

Virtually all French ad industry insiders say Ayer France can't survive in its present form. No one knows for sure what effect Ayer France's status is having on the ongoing discussion between the U.S. and European groups. Their split-and eventual search for new partners-was inevitable because the two don't have any common clients, but several that conflict, including NW Ayer's Procter & Gamble and General Motors business and Ayer Europe's Beiersdorf account and pitch for Volkswagen's SEAT.

The Ayer France problem stems from the alleged embezzlement in 1990 of funds by an independent media buying company, whose principal fled to Hong Kong to avoid criminal prosecution. Although the agency was not held liable for its clients' money intended to to pay for TV ad time on TF-1, MGTB took on debt to assume responsibility for the $5.7 million its clients lost.

Ayer Europe became involved when it bought 85% of a healthy Ayer France in 1992. What brought the crisis to a head was the 1993 enactment of the loi Sapin, France's media law, that prevents ad agencies from also buying media. Much of MGTB's revenues came from media buying, and without them, the agency could no longer repay the debt.

Ayer Europe is now deciding whether to sell MGTB to Euro RSCG-reportedly interested in merging it with Paris agency Tennessee-or to pump in cash. MGTB has gross income of $19.7 million in 1993, down 8.6% from 1992.

Neither MGTB, Ayer Europe nor Euro RSCG officials commented.

"Strategically Ayer would be crazy to leave itself without a Paris agency," one advertising executive said. "It's a horrible choice for Ayer."

Most Popular
In this article: