
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