Latino-Owned Ad Firm Acquires a Mainstream Shop
In what is believed to be a first for the advertising industry, a local Latino-owned agency has purchased a mainstream ad shop.
Castellanos Latina Advertising, a 4-year-old Hollywood agency that creates Spanish-language ads for Forest Lawn Memorial Parks and bilingual ads for Mazatlan Tourism, on Thursday purchased the 16-year-old Encino-based agency Good Guise Advertising & Marketing. Good Guise creates ads for several residential real estate firms in the San Fernando Valley.
Good Guise will become a division of the newly named CLA Advertising. Both agency founders declined to reveal the purchase price, but combined annual billings of the two agencies are expected to exceed $22 million. Next week, the combined agency will relocate in new headquarters in Encino.
“It is a buyer’s market out there,” said Julio J. Castellanos Sr., CLA chairman, who revealed that he is also negotiating to buy a second mainstream firm in the Los Angeles area. “The timing is right if you have your financing in order.”
Until this unusual purchase, the rule of thumb has been for agencies in search of ethnic diversity to snap up smaller Latino firms. For example, the two giant British ad conglomerates, WPP Group and Saatchi & Saatchi PLC, both own Latino agencies in Southern California. But Castellanos has turned the tables.
Indeed, tough times forge odd partnerships. The purchase comes at a time when the advertising market in Los Angeles--and nationwide--is in a tailspin. Even the Latino ad market, which saw rapid growth in the 1980s, has suffered a recent slowdown. Nevertheless, an estimated 45% of Los Angeles area residents are Latino. The purchase appears to be indicative of the increasingly unconventional measures agencies are now willing to make to keep their heads above water.
“This is definitely out of the norm,” said Jesus Chavarria, editor and publisher of the Santa Barbara-based publication Hispanic Business. “Most Hispanic shops are not interested in broadening their base. But during this soft economy, it seems as if people are trying to see what can be done to protect what they have.”
Castellanos said the purchase bolsters his firm’s payroll to 27 employees and immediately broadens the creative potential at his agency. Castellanos may be best known for the splashy “TGI . . . Mazatlan” advertisements it created. Nearly half the ads the firm creates are in English.
The purchase also could enhance the firm’s credibility with clients who advertise in both Spanish and English. “Now,” said Castellanos, “clients will know we stand to lose nothing by recommending to them whether to put their ad dollars into the English or Hispanic market--or both.”
But the growth does come at a price. Only 10 of the 17 current employees at Good Guise have been hired by Castellanos. The others have been laid off. Among those joining the firm is NormanLynn Cutler, founder and president of Good Guise, who remains president of the new division. She views the sale with mixed feelings.
“I could have survived. I survived the two other downturns,” said Cutler. But she said that she had grown tired of the wild swings in the ad business, and she believes that Latino advertising is the least likely to suffer during a recession.
While the Good Guise is generally recognized as a talented creative shop, its growth has been relatively slow since the agency was formed in 1974. Its primary concentration is on real estate marketing, and its clients include Valencia Realty and Paragon Homes. Although real estate marketing proved to be a booming area during much of the 1980s, it has haunted the agency during the current real estate doldrums.
Although executives at local minority agencies say they are impressed by the move, they also note there are risks. “The real estate industry is down, so a return on this investment is not likely to occur in the short term,” said J. Melvin Muse president of the Los Angeles minority ad shop Muse Cordero Chen Inc. “But as a long-term strategy, I applaud it.”
