Global Deals Reshaping Agencies

As auto makers, airlines and banks reach across oceans to form multinational giants, small advertising shops are scrambling to find shelter in the arms of larger ad agencies with a similar geographical reach.

The ad industry consolidation is especially evident in San Francisco, a bastion of independent agencies.

“There are about a dozen global advertising networks and pretty much every one of them contacted us in the past year,” said Tom Bedecarre, chairman of Citron Haligman Bedecarre, which was acquired last week by a unit of Paris-based Havas Advertising. “We were the largest remaining independent in San Francisco, which made us the most popular girl on the dance floor during the past year.”

Half a dozen agencies have been swallowed up during the ad agency gold rush. The list includes Hal Riney & Partners, long the Bay Area’s largest independent, which last May agreed to be acquired by French giant Publicis.

The deals occurring around the world are driven by corporate executives who once were content to turn their advertising and marketing over to agencies in different countries, said John Hegarty, chairman of London-based Bartle Bogle Hegarty, which is 49% owned by Chicago-based Leo Burnett Inc.

“Clients want more control over what their image stands for around the world,” Hegarty said. “The way people travel these days . . . and with the Internet, which truly is a media without borders . . . there’s a much greater need for one single source of authority on what a corporate image is going to be.”

Corporate executives want agencies that deliver such related advertising services as direct marketing and interactive media.

Bedecarre said his San Francisco-based agency will gain those strengths by joining Havas unit Euro RSCG.

“It’s simply a lot easier to become affiliated with a much bigger organization and tap into the resources that they have established than to organically try and grow them,” he said. “There were some specialty areas that we dabbled in where we now have a strong network [of affiliated companies] that we can tap into.”

Agency executives voice the same refrain when asked why they’ve agreed to be acquired.

“The Citron deal sounded the same as the Riney deal, which is pretty much the same story as our situation,” said Fred Goldberg, chairman of Goldberg Moser O’Neill, which in two years will become part of Lowe Group, a unit of New York-based Interpublic Group of Companies.

Not all of the new affiliations involve outright acquisitions. WPP Group’s Ogilvy & Mather unit is contracting with such independent shops as VitroRobertson in San Diego and WongDoody in Seattle. Ogilvy & Mather gets access to creative minds around the world while independent shops gain access to the firm’s global network of services.

And some independents hope to continue growing by opening offices overseas. London’s Leagus Delaney has a San Francisco branch office, and Fallon McElligott in Minneapolis recently opened a 10-person office in London. Bartle Bogle Hegarty, which earlier opened a Singapore branch, last fall migrated to New York.

The swirl of deals, however, isn’t changing the competitive mix.

“It’s ironic because our agency is still competing with Goodby, Goldberg and Chiat Day,” Bedecarre said. “It’s the same people we’ve always fought. But it’s now a chess game in terms of matching your interactive division with our new interactive operation, your direct marketing against our direct marketing and your global network against our global network.”

The deals can bear immediate fruit. A potential client recently said it intended to drop Goldberg Moser O’Neill from a competition because the firm wasn’t strong in business-to-business marketing in the high-tech arena. Goldberg quickly responded that a sister company “has excellent credentials in business-to-business and handles Intel’s work. We’re now in the finals for that [contract]. That’s an opportunity we never would have had without the other member agency.”

Bedecarre said the deals are necessary because small, creative agencies can get lost in the shuffle.

“We’ve found ourselves making presentations to clients who [later] would whisper, ‘You won the review, but the chairman never heard of you, so he decided to go with names he’s heard, with big networks he trusts.’ ”