Advertising Age published a lengthy report featuring more analysis on the IPG fire sale of Hill Holliday and Deutsch New York to Attivo Group. At least two excerpts warrant commentary.
Here’s Excerpt 1:
“IPG regularly reviews its portfolio to look for opportunities to simplify its structure and better orient the company to areas of growth,” a spokesman for IPG told Ad Age. “While DNY and Hill Holliday continue to deliver value and creativity for brands, their areas of expertise duplicated existing assets within the holding company.”
This point was pondered by another pundit. Can’t help but note it’s a pile of bullshit. Since the beginning, White holding companies have taken advantage of the sameness of White advertising agencies within networks, offering up replacement shops when clients expressed unhappiness.
For example, after USAA fired IPG shop Campbell Ewald for being racist, the client ultimately picked another White advertising agency within the IPG global outhouse. Don’t think for a nanosecond that IPG did not serve up droves of duplicate dumpsters.
Here’s Excerpt 2:
Both [Deutsch New York CEO Val] DiFebo and [Hill Holliday CEO Chris] Wallrapp said the Attivo acquisition will allow the shops to invest in new and growing capabilities. In particular, DiFebo said Deutsch NY will be looking to grow its graphic and design expertise. Wallrapp said Hill Holliday is looking to invest more in media and data and analytics.
Um, wasn’t access to greater resources a key benefit of being in a White holding company—so why are Deutsch NY and Hill Holliday eager to expand their capabilities? Plus, if these shops were deemed to have duplicate areas of expertise, won’t that pose a duplicate problem for Attivo Group?
Finally, there’s one area of interest where neither shop cares to invest: DE&I. Deutsch NY has already gone on record regarding the topic. Hill Holliday arguably made a failed investment. Both shops have demonstrated an abject lack of success with investing at all—so Attivo Group better think twice before providing any type of financial support.
Inside IPG’s sale of Deutsch New York and Hill Holliday—and what ad experts think of the move
IPG selling two of its legacy agencies to Attivo Group could spur other holding companies to follow suit
By Brian Bonilla and Lindsay Rittenhouse
The new year started with a surprise yesterday when Interpublic Group of Cos. announced it was selling two of its creative agencies, Deutsch New York and Hill Holliday, to Auckland, New Zealand-based global marketing services company Attivo Group.
Although the move is the latest in a slew of acquisitions and mergers within the ad industry over the past year, it’s still relatively rare for a holding company to sell two legacy agencies.
Most of the mergers and acquisitions to date have come from independents: Gut, L&C NYC, Majority, Movers+Shakers, and Uncommon all sold various stakes of their agencies last year. Brainlabs and Barkley accepted investments from private equity firms last year, and Stagwell sold its healthcare marketing agency ConcentricLife to Accenture.
What makes IPG’s move stand out further is that it’s unwinding two agencies it has held for more than two decades. Industry insiders believe that it could signal a bigger trend of holding companies selling underperforming assets—and that the buyers will increasingly come from outside of the traditional agency realm.
“To be competitive, [IPG has] to find efficiencies,” said Sasha Martens, industry recruiter and president at talent firm Sasha the Mensch. “It wouldn’t surprise me to see more companies sold off.”
“It speaks volumes that IPG valued the immediate payoff higher than they did the ongoing asset,” said Steve Boehler, founder of consultancy Mercer Island Group.
Given that the buyer came from an unexpected place—a global consultancy in New Zealand—another industry executive predicted more unconventional acquirers would follow. “It’s going to be an interesting year,” he said.
Financial terms of the deal were not disclosed.
Why sell
In IPG’s latest earnings call in October, CEO Philippe Krakowsky alluded to several underperforming parts of its business, including its digital shops R/GA and Huge. IPG’s Integrated Advertising and Creativity-Led Solutions segment, which includes all its creative agencies, decreased by 4.1% organically in the third quarter.
“IPG regularly reviews its portfolio to look for opportunities to simplify its structure and better orient the company to areas of growth,” a spokesman for IPG told Ad Age. “While DNY and Hill Holliday continue to deliver value and creativity for brands, their areas of expertise duplicated existing assets within the holding company.”
The headwinds that have battered agencies in recent years—capricious clients, rising reviews, a rocky new-business environment, margin pressures and more—are forcing a divest-versus-build approach, said one industry executive. Holding companies “are neutral,” said a former Deutsch executive who spoke on the condition of anonymity. “They are there to count the money.”
“Holding companies went through such a spree, it’s likely we will see more divestment like this [referring to the Hill Holliday and DNY acquisition] or else consolidation as WPP and Dentsu have been doing,” said Greg Paull, principal of consultancy R3.
But Matt Ryan, CEO of consultancy Roth Ryan Hayes, said there is still untapped potential in creative agencies, which is why he isn’t surprised to see private equity firms show more interest in the advertising space.
“It’s kind of a fallacy that there are too many agencies out there that are losing money, and the reason is simple: If they were losing money, they’d have to close,” Ryan said. “The truth is more in that the agencies are getting smaller or they have flat to little growth so they’re not really appealing from a public company standpoint.”
Paull predicts that Havas could be the next shop to be spun off; in December, Bloomberg News reported that French billionaire Vincent Bolloré was weighing a breakup of his holding company Vivendi. (Havas did not immediately respond to a request for comment.)
“It’s not hard to create a potential list. Just take a look at the smaller agency brands that are still in existence at some holding companies,” said Boehler, who declined to name them.
Business losses
Deutsch NY hasn’t made the same strides as its LA counterpart since Deutsch was split into two entities in 2020. At one point, the New York office counted Anheuser-Busch InBev, Reebok and Microsoft among its clients.
Deutsch New York CEO Val DiFebo, who will remain in her position, admitted that the agency isn’t at its peak. In October the agency set plans to lay off an estimated 19% of its staff at the beginning of 2024.
“Losing our PNC business last year definitely set us back,” DiFebo said. “And it’s really unfortunate that that happened because at the same time we were winning lots of pieces of business. We probably won five or six pieces of business at the same time that PNC was migrating out the door.”
In 2023, Deutsch New York won business with Dr. Praeger’s, Simple Mills and Kenvue’s Band-Aid brand. Its other clients include Galderma, Lactaid and Betway. In June, PNC Bank selected Arnold Worldwide as its integrated marketing and creative agency of record.
“Once Deutsch lost PNC, which was 60% of their revenue, there was no business left,” the former Deutsch executive said, noting that smaller account wins couldn’t “keep the infrastructure in place” following that loss. The agency denied PNC accounted for that much revenue but declined to specify an exact figure.
“I would say we have a ton of momentum right now, but we’re not at our peak,” DiFebo said.
Hill Holliday CEO Chris Wallrapp, who will also remain in the role, also pushed back on the notion that the agencies were sold due to underperformance within IPG.
“The entire industry has been up and down, and the way that we approached even going into the pandemic, and last year we ended strong with two new client wins,” he said. “We’ve seen strong organic growth across the board on our current clients. And so I’m really happy with the steady growth that we’ve been able to provide the agency in our business.”
Both DiFebo and Wallrap said the Attivo acquisition will allow the shops to invest in new and growing capabilities. In particular, DiFebo said Deutsch NY will be looking to grow its graphic and design expertise. Wallrapp said Hill Holliday is looking to invest more in media and data and analytics.
From family to affiliates
The two agencies will maintain an affiliate status with IPG, which means they can utilize the holding company’s other agencies and resources. One major benefit of this is less pressure around working with conflicting clients.
“There have been times where we’ve wanted to pitch something and [IPG] was like, ‘Yeah, sorry, IPG has a healthcare brand in that space, or IPG has a beauty brand,’ but because we’re not part of the same network, we will now be able to pursue some of those things,” DiFebo said.
“It allows more flexibility, unique strategic approaches on how we can work with our clients and how we can attract new clients. “I do think there is a nimbleness to working with a privately held independent holding company,” Wallrapp added.
While flexibility could certainly be a benefit, the new structure could be confusing at first glance.
“This agency complexity should not be made to be the client’s problem. And this deal between IPG and Attivo Group is nothing if not complex and confusing,” said Jay Pattisall, VP and principal analyst at Forrester. “How can marketing executives be expected to keep all this straight? In a market where clients are asking for streamlined partner solutions, where nearly a third of new business reviews result in consolidation, I can’t quite put my finger on the logic.”
Deutsch vs. Deutsch
Another point of potential confusion could be Deutsch’s name, which now exists within both IPG and Attivo. (Deutsch LA will remain part of IPG; similarly, IPG is retaining Hill Holliday Health).
A memo sent out by Deutsch LA CEO Kim Getty yesterday to the agency’s staff referred to the New York office as “DNY” rather than Deutsch. “I’m coming to you with an update which you will see later this morning in the news, that DNY (formerly Deutsch New York) is being sold by IPG,” Getty wrote in her memo. “As you know, it has been over three years since Deutsch LA officially split from DNY, so this move as relates to DNY is a natural progression for IPG in that process. “Since we separated from NY, we’ve honed our own path forward and thrived at a time when other independent creative agencies have struggled to find their footing.”
Deutsch New York can continue using the Deutsch New York name until the end of the year, according to IPG.
“A lot of our clients hired an iconic agency called Deutsch, and so for us to just change our names today would be kind of crazy,” DiFebo said, noting that many clients already refer to it as DNY. “For right now, I think we’re just going to stay with what we have.”
Donny Deutsch, chairman emeritus of the agency his father David Deutsch founded in 1969, could not be reached for comment.
Next steps
Attivo founder Cam Murchison declined an interview, but DiFebo and Wallrapp said the company will likely make further investments in the U.S. DiFebo said Murchison’s ambition is to be a “stronghold” in the country. Yesterday’s acquisition marked Attivo’s first investment in the U.S.
“We are living through a hugely disruptive period of global change, and in change there is opportunity,” Murchison said in a statement. “We will move fast and quietly on that journey.”
For now the two agencies are focused on keeping their employees informed and transitioning to a new ownership. DiFebo said Deutsch New York will move from an office space it shared with The Martin Agency, MullenLowe and Cambell Ewald, to a new space that is leased by IPG. Hill Holiday’s New York office will also reside in the new space. (Hill Holiday is based in Boston.)
Industry observers said the sale to Attivo could benefit both agencies.
“The holding companies have put their emphasis on a handful of very large brands and in many cases have not adequately supported their mid-sized brands,” Boehler said. “Agencies like Hill Holiday and Deutsch NY will have a chance to better market themselves away from [IPG]. We’ll see if they can.”
Contributing: Aleda Stam
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