Aegis’ New CEO Says It Again: We’re Not For Sale

Newly named Aegis Group CEO Robert Lerwill says he will continue to embrace, at least for now, the company’s contrarian strategy of remaining independent in a rapidly consolidating media-agency world. And while analysts agree that the holding company is on solid footing at the moment, some question whether Lerwill will succeed in sticking to that strategy.

“He would say that, wouldn’t he?” said one London-based analyst who follows the company closely.

The question buzzed through media circles last week after Doug Flynn, who had guided Aegis as its CEO for six years, resigned and was replaced by board member Lerwill—a veteran of the consolidation wars who helped create one of the first giant agency holding companies in the 1980s and ’90s when he was group finance director at WPP Group.

In the course of the past five years, mergers and acquisitions have rearranged the media-agency world as thoroughly as they have every other industry. In 2003, WPP acquired Cordiant for $276 million. And once it completes its $1.52 billion acquisition of Grey Global Group and its media arm, MediaCom, later this year, WPP’s Group M will contain four media brands totaling more than $40 billion in worldwide billings, according to RECMA. The combined billings clout of Omnicom Group, Interpublic Group and Publicis Groupe’s media networks ranges from $24 billion to over $30 billion.

“Scale is what counts,” said the London-based analyst. “The big holding companies will always crave bigger scale and pricing power.”

Aegis would add a huge piece of media business to a potential buyer, with its Carat network holding an estimated $18 billion in worldwide billings and its secondary media network, Vizeum, at just under $2 billion, according to RECMA.

Aegis has attracted the interest of potential suitors from time to time. Most recently, sources said, talks between Publicis and Aegis got as far as a signed letter of intent—but both Lerwill and Publicis CEO Maurice Lévy strongly denied those reports. “We have never thought of acquiring Aegis,” Lévy told Adweek, indicating that the holding company has never held acquisition talks with Aegis or even considered it.

In an interview last week, Lerwill stressed that Aegis was not for sale, would not be for sale and that there were no current offers on the table to acquire the company.

In the 1990s, Omnicom owned approximately 20 percent of Aegis and considered acquiring control, but it later disposed of the holding.

“Remaining independent is very simple,” Lerwill said last week. “You give outstanding service to your clients. You’re responsive to their increasingly complex needs to understand consumers and where you place media.”

But what about the clout and leverage factor? “We’re big enough and have the critical mass so that we can compete effectively for clients who would choose us rather than an in-house media agency, which is really what the media agencies in the big marketing-services groups have become.”

Of course, for clients, it’s not necessarily an either/or choice. Packaged-goods giant Procter & Gamble, which does plenty of business with holding companies, last year added Carat North America to its roster of agencies with an estimated $500 million-plus piece of media planning business across multiple brands. Bear Stearns estimates that the P&G assignments represented half of the agency’s new business in 2004. Carat’s U.S. arm, in fact, is flourishing, handling blue-chip-category accounts such as Kia and Hyundai and New Line Cinema and getting regular invitations to pitch against top-tier shops in the biggest media-only reviews.

A big advantage Aegis brings to clients, Lerwill said, is that company has fewer conflicts than its bigger competitors. “The big marketing groups claim they can keep their individual brands separate if that’s what clients want, but many clients are intuitively concerned about putting too many eggs in one big marketing-services-group basket,” he said.

Analysts give Aegis high marks for its financial performance in 2004. The agency has not released full-year results yet, but analysts estimate that full-year revenue was up 14 percent over 2003, while media revenue was up 6 percent.

But some areas of the company do need shoring up. Bear Stearns analyst Nick Bell said “the only fly in the ointment for Aegis remains Carat France, where a number of client defections could signal a slowdown in growth for this region in 2005.”

And Flynn’s resignation came within weeks of the departure of Colin Mills, who headed Carat’s agency operations in the U.K. Nielsen Media Research reported that billings for Carat U.K. were down 8 percent from 2001 through 2003, to approximately $980 million. An Aegis rep countered that business in the U.K. improved in 2004, although he declined to provide specific figures.

The company has also been slow to execute a strategy to bring its second agency brand, Vizeum, to the U.S. “It’s a question of finding the right vehicle for doing it,” Lerwill said.

Lerwill’s promotion was well-received by David Verklin, CEO of Carat Americas. “I’ve known him for the five years he’s been on the Aegis board, and he’s very nice and very disciplined,” Verklin said. “I think it also makes sense to have a finance guy running the holding company, which is becoming a trend.”

Lerwill, 53, has been a member of the Aegis board since 2000. He was chief financial officer at WPP Group from 1986 until 1996 and subsequently joined Cable & Wireless, where he was group finance director, and then became CEO of Cable & Wireless Regional.

Aegis chairman Colin Sharman noted Lerwill’s “extensive experience in the media world. … Aegis is in a strong position to develop, and Robert will bring further momentum to” the company, he said.

Flynn resigned to become CEO of Rentokil Initial, a pest-control company, Aegis confirmed.