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Interpublic Group of Cos. is thinking big about small agencies.

Two Interpublic shops, New York's Gotham Group and LCF&L, are merging to form Gotham. The new shop will have $270 million in billings, the bulk coming from LCF&L; it will rank among the top 50 agencies in the U.S. and will be the fourth largest Interpublic agency, trailing McCann-Erickson Worldwide, Ammirati & Puris/Lintas and the Lowe Group.

"We had two people interested in having a bigger entity," said Interpublic Chairman Philip H. Geier Jr. "We listened to their proposal and blessed it ... There are a lot of clients today that are not international or at least operate more locally, and this is an agency that provides an ability to serve them, particularly when we have agencies in our [worldwide] systems with a lot of conflict problems."

Strategically, Mr. Geier compared the new agency to both Interpublic's Los Angeles-based Dailey & Associates, or Marschalk before it was subsumed into Lowe & Partners.

Interpublic has no plans to stretch Gotham into a global network; Mr. Geier's feeling is "Three is enough. We have to feed the ones we have."

Although Interpublic executives met with Saatchi & Saatchi Co. a month ago to discuss an acquisition of Campbell Mithun Esty, one Interpublic executive said the holding company is only interested in CME to run as a stand-alone in the U.S. for a year. Then a decision will be made on whether to merge it with any other Interpublic properties. But the agency wouldn't be used to form a fourth network.

The new Gotham will have the option of teaming with Interpublic systems to service international accounts much as non-Interpublic agency Wieden & Kennedy, Portland, Ore., has paired with McCann to pitch Nike business overseas.

"The Wieden & Kennedy model is a good example of how we could operate with any client around the world," said Stone Roberts, Gotham Group chairman who with LCF&L President Larry Dunst proposed the merger. They will serve as co-chairmen of the new agency.

Gotham Group President Sheri Colonel becomes president, while Lynn Giordano becomes chief creative officer from creative director of the Gotham Group.

The agency, which will be headquartered at LCF&L's current Madison Avenue address, will have a client roster that includes Bristol-Myers Squibb Co., Abbott Laboratories, Dial Corp., Clairol, Mercedes-Benz independent dealers, Maybelline, 3M and Time Warner. The only conflict posed by the combination was cosmetics marketer Del Laboratories, which LCF&L will resign.

Mr. Dunst said no layoffs will follow the merger.

The merger also puts a new take on the Madison Avenue trend of using agency spinoffs to resolve problems of agency talent and client restlessness as well as conflicts.

"There's a certain size an agency can operate with and service clients properly, and this gets them into that bracket," said Mr. Geier, who said he believes the two can now service clients and prospects in a "major way. They both have strong package-goods experience and Gotham's creative flair, particularly with Maybelline, gives them a good overall image."

Asked whether Gotham might work for Coca-Cola Co.-which has been giving assignments to smaller, creative agencies, sometimes at the expense of McCann-Mr. Geier said, "That's up to Coke."

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