For L.A. Agencies, It’s Merger Madness Time
Joe Eisaman isn’t shy to admit it. He’s on the prowl to merge his agency with a smaller ad firm. “It might never have happened in better times,” said Eisaman, whose Los Angeles agency Eisaman, Johns & Laws Advertising, creates ads for Neutrogena and Price Pfister. “But rather than everyone hunkering down, I see the opportunity for two small agencies to both get stronger by merging.”
By one estimate, nearly half of the 250 or so agencies in the Los Angeles area are scouting around for partners. In a climate where new advertsing business is harder than ever to come by, one of the best ways to capture billings is to simply join forces with another agency.
David Suissa, president of Suissa & Associates, says that he expects to complete the acquisition of a small Los Angeles agency soon. Two weeks ago, the papers were finally signed on a deal that placed portions of Keye/Donna/Pearlstein in the hands of the newly named agency, Livingston & Keye. And six months ago, the Los Angeles office of Evans Advertising merged with the agency Scott Lancaster Mills Atha.
“The ad industry is basically in a depression, so you have a lot of smaller agencies trying to get out of trouble by merging,” said Hank Porper, whose Los Angeles firm HHP Financial Services helps match and finance agency mergers and acquisitions.
In the 1980s, the industry byword was mega-merger as British ad giants Saatchi & Saatchi and WPP Group gobbled up huge American agencies. But the two firms are now struggling with huge debt loads. The ‘90s may be the era of smaller agencies seeking salvation in mini-mergers.
“For us, it makes all the sense in the world,” said Suissa, who said the agency he is negotiating to acquire has seven employees and annual billings of about $5 million. “It’s a smart way to pick up business without spending a lot of money pitching new accounts.”
At the Los Angeles agency Asher/Gould Advertising, President Bruce Silverman said he’s been hunting to buy a smaller agency for six months.
“It’s become tougher and tougher for smaller agencies to win new business,” said Silverman, who wants to buy a $10-million to $15-million agency. Pitching new business is expensive and dicey, he said.
But executives concede only a minority of mergers and acquisitions are successful.
A few months ago Craig Campbell, president Campbell & Wagman, thought he had found an agency to acquire. “But by the time they show you their books,” he said, “you find out they’ve got $800,000 in debt and a long-term lease on expensive digs.”
Some agency executives say they are hesitant to merge after watching the fallout from the merger last September between Evans and Scott Lancaster. Months after the merger, several of Scott Lancaster’s biggest clients were lost and Evans found itself stuck with a bloated payroll and little new business to show for it. “It didn’t work short term, but my hope is it works long term,” said Jim Winters, chairman of the Los Angeles office of Evans.
But acquisition overtures are still being heard.
The newly merged Livingston & Keye ad shop was in business just one week when a major agency approached Roger Livingston, its chief executive, about buying the ad firm. “Of course, we don’t want to do that,” said Livingston. “We’re not interested in opening for business on Tuesday and selling on Friday.”
War and Peace Popular Ad Themes These Days
Advertising’s rush to gush over Operation Desert Storm has already kicked into high gear.
Macy’s ran a full-page ad in several national newspapers last week offering “heartfelt gratitude” to its employees--listed individually by name--who are in the armed services. And Walt Disney World’s Swan resort hotel in Lake Buena Vista, Fla., is touting a 75% discount to active U.S. military personnel and their families who stay for four days and three nights--roughly the “100 hours” of the ground war.
Club Med, however, has taken a slightly different tack. Instead of playing up patriotism, the resort chain is advertising stress relief. Its latest print campaign for one-week vacations simply says: “For 7 days forget everything you heard on CNN.”
Campbell Firm Wins Pocket Pretzel Account
Campbell & Wagman has pocketed another piece of new advertising business--Pocket Pretzel. The bite-sized pretzels filled with peanut butter are made by Maxim Marketing Corp. of Pomona.
Although the size of the account was not revealed, it is believed to be about $3 million. The win comes less than two weeks after the agency won the estimated $1-million ad business for Fosters Freeze. Campbell said his agency doesn’t plan to hire any additional employees.
Sarcasm a Weapon in Fast-Food Duel
Name-calling in advertising is getting pretty nasty these days. So nasty, in fact, that even Colonel Sanders is now taking it on the chin.
Rival chicken maker El Pollo Loco is running radio spots that ask customers to recite the phrase, “Thanks, but no thanks, Colonel,” in order to receive special deals on chicken at El Pollo Loco. The ad, created by the Los Angeles office of McCann-Erickson, mocks the ongoing centennial celebration for Kentucky Fried Chicken’s favorite colonel. When an announcer states, “KFC’s got the taste that’s never been duplicated,” another man asks, ironically, “Gee, I wonder why.”
How does KFC feel about El Pollo Loco’s volley? “Comparative advertising doesn’t often work,” said Gregg Reynolds, vice president of public affairs at KFC Corp. “It sounds like a pretty feeble attempt to tap into our great brand name.”
