(2 of 3)
Mergers are also fueled by rising costs and the increasing international needs of advertisers. As U.S. businesses seek a stronger foothold in foreign markets, the agencies are under pressure to offer these clients full-service global marketing operations. Since 1975, Foote, Cone & Belding has acquired agency interests in Europe, South America and Asia. For smaller agencies, mergers may be the only way to branch out in international business. Example: New York City's Leber Katz Partners ($291 million) agreed to join Foote, Cone last month. Says Stanley Katz, the chief executive of Leber Katz: "This at long last provides us with the type of global capability that we and our clients have wanted for several years.
Some agencies feel that they must merge just to stay in the big leagues, especially following so many multibillion-dollar mergers among the manufacturing concerns they represent. Says Harry Paster, executive vice president of the American Association of Advertising Agencies: "Show me an agency that is sitting still, and I'll show you an agency whose profits are declining." New York City's Backer & Spielvogel ($385 million) used to fear that without overseas offices it was vulnerable to client raids by other agencies. Those concerns increased, says Founder Carl Spielvogel, when a British firm was hired to help introduce Miller Lite beer, one of his clients, in Britain. Says he: "You don't expose your back door like that. Let them in the backyard, and they'll work their way back to the U.S." Last month Backer & Spielvogel agreed to be acquired by Saatchi & Saatchi.
Sometimes a pair of second-tier firms can combine to enter the top ranks. Last June, Benton & Bowles, an old-line Madison Avenue firm then ranked No. 14, agreed to merge with the Bloomfield Hills, Mich.-based D'Arcy MacManus Masius (No. 12), which is best known for its Budweiser beer ads featuring Clydesdale horses. With combined billings of $2.2 billion, and such huge clients as General Motors and Procter & Gamble, the new agency is now the ninth-largest worldwide, with offices in 24 countries.
The merger of BBDO, Doyle Dane Bernbach and Needham Harper borrows an idea pioneered in the 1960s and '70s by Interpublic ($4.7 billion), a group of three international agency networks whose centerpiece is McCann-Erickson Worldwide ($2.3 billion). By linking multiple agencies, Interpublic is able to | offer an impressive array of marketing services on five continents.
The new supermerger came about after BBDO's Rosenshine informally explored separate combinations with Needham and with DDB during the past year. Rosenshine was pondering the possibilities at a weekend home in Great Barrington, Mass., when he dialed BBDO International Group President Willi Schalk, who is based in Dusseldorf. "I have an idea you'll probably think is nuts," said Rosenshine, explaining his notion of a three-part merger. But Schalk said he had been thinking along the same lines.
When Rosenshine broached the idea to the two smaller agencies, he learned that they had talked of merging with each other in the past year. "Then the adrenaline really started flowing," recalls Rosenshine. "We all knew that if we pulled it off, it would be the most dramatic merger in the business."