Saatchi Brothers to Let a New Chief Run Ad Agency
The two hermitic brothers who created the world’s largest advertising agency, Saatchi & Saatchi PLC, said Thursday that they will step down at the end of the year as joint chief executives of the troubled ad firm.
Replacing Charles and Maurice Saatchi as chief executive of the London-based advertising and consulting firm is Robert Louis-Dreyfus, 43, who has been chairman of IMS International, one of the world’s largest market research firms. Louis-Dreyfus--who is regarded by some as a financial wizard--will take over as chief executive Jan. 1.
But the camera shy Saatchi brothers--perhaps best-known for both shunning publicity and collecting rare art work--are hardly out of the picture. Maurice Saatchi, 43, will remain as group chairman. And Charles Saatchi, 46, retains a seat on the board. A Saatchi spokesman said that Saatchi executives--including Louis-Dreyfus--were unavailable for comment.
Maurice Saatchi, according to the Financial Times of London, said the appointments were “designed to ensure that the group’s next 20 years are as glorious as the last 20 years, and not like our last year.”
The agency, the subject of takeover rumors for several months, reported in June that its fiscal 1989 pretax profits plummeted more than 57%.
While the Saatchi name may not be very familiar to many consumers, some of the ads that its various agencies produce probably are. One of its Los Angeles ad agencies, Saatchi & Saatchi DFS/Pacific, creates the ads that show happy customers jumping up in the air for their Toyota cars and trucks. And one of its New York agencies, Backer, Spielvogel, Bates, may be best-known for its off-the-wall ads that feature ex-professional athletes pitching Miller Lite beer.
Although Thursday’s move at Saatchi surprised few in the advertising world, it may represent far more than a changing of the guard at the huge advertising agency. Some say it could signal a slowing of the trend of some agencies to grow almost exclusively by willy-nilly acquisition.
“It’s the end of an era,” said Marvin Sloves, chairman and chief executive of the New York ad agency, Scali, McCabe, Sloves. “The sheer act of acquisition just for the sake of getting larger will probably stop for awhile now.”
Others say Saatchi caused many of its own problems by purchasing a number of American ad agencies for inflated prices without giving much consideration to the conflicting advertisers that the agencies handled.
“They were instrumental in changing the business,” said Alan Pando, president of the ad agency DDB Needham West. “They made the financial community and the advertising community realize that this is a business that can be bought and sold.”
Analysts generally say Thursday’s announced management changes may reduce the likelihood of a near-term takeover of Saatchi & Saatchi. Others say, in the longer term, Saatchi may actually become a far more attractive takeover candidate.
“I give these guys credit,” said James D. Dougherty, an analyst with the New York investment firm County NatWest USA. “They recognized a problem and did something about it before someone did it for them.”
Besides the addition of Louis-Dreyfus, Saatchi also said Thursday that Charles Scott, 40, who worked with Louis-Dreyfus at IMS, would become group finance director. Despite these management changes, at least one advertising expert speculates that the Saatchi brothers may continue to call the shots at the agency.
“It is my personal belief that they will still control the board,” said Andrew Jaffe, editorial director of the trade magazine Adweek. “The name on the door is still Saatchi & Saatchi. It is still their company to run, give away or sell.”
For nearly a year, Saatchi has been trying--with no success--to sell all or part of its struggling consulting business. One New York analyst estimates that it is worth about $410 million. Wall Street analysts generally estimate that Saatchi could eventually be purchased for something in excess of $1.5 billion.
One prospective buyer of the agency is Southeastern Asset Management, a Memphis-based investment firm that holds a 10% stake in Saatchi--even more than the two Saatchi brothers own. But Southeastern’s president, Mason O. Hawkins, recently stated that his company has no interest in purchasing Saatchi. Through his secretary, Hawkins declined to comment on Thursday.
A top British advertising executive, who asked not to be identified, speculated that Louis-Dreyfus may have negotiated for a large stake in Saatchi & Saatchi. “He’s certainly not in need of a job. He made millions when he sold his stake in IMS to Dun & Bradstreet. I suspect he wants a large ownership position in Saatchi.”
Although Louis-Dreyfus is hardly an experienced advertising executive, analysts say he has a strong track record at improving a company’s bottom line. During the seven years before he sold IMS last year, Doughtery said, its revenue grew an average 14% per year and its net income jumped an average 20.2% per year. “I can’t think of a better guy to be chief executive,” said Doughtery. “This is precisely what Saatchi needs.”
But at least one advertising executive disagrees. “You need people who know something about advertising to run advertising agencies,” said adman Sloves. “Would you want a guy running an airline who knew nothing about planes?”
