Carat USA, Fusion Unite

NEW YORK Aegis Group’s Carat today unveiled a major restructuring that merges Carat USA with digital unit Carat Fusion.

Ray Warren, president of Carat USA, is leaving the company.

Sarah Fay, who had overseen the domestic operations of Isobar, the unit that manages all Aegis digital assets, including Carat Fusion, will run the merged entity as CEO. She retains the chief executive title and oversight of Isobar.

“In order for traditional media to thrive in today’s marketing landscape, it must incorporate digital into the heart of the strategy. We believe that combining these two great companies together into a single organization reinvents the agency model. It is a game-changer,” said David Verklin, CEO of Carat Americas.

Verklin said the merger is the first of its kind. “I don’t think this has been done this way anywhere in the world,” he said. “Certainly of this scale and size.” And he believes it will be a model that others will follow.

The merged entity, to be called Carat, has roughly $7.6 billion in billings, with $7.1 billion coming from Carat USA clients and and estimated $500 million spent by Carat Fusion clients. In 2006, Carat USA had $240 million in revenue and Carat Fusion had about $48 million. The new shop will have close to 1,000 employees.

Fay added that Combining the two just “makes plain sense,” because it allows Carat to have one team serving clients and eliminates duplication. “We just want to make it a formal structure and process where there’s a strategic lead who understand digital strategies and traditional.”

“We need people who are in the lead role with clients to be able to talk about an entire program from end to end,” she said. “We can’t have a client lead for traditional and digital. The worst thing for a client is when there’s two voices.”

Scott Sorokin, most recently president of Carat Fusion, becomes president of the merged operation.

Warren joined Carat USA in mid-2005. During his tenure Carat experienced a number of highs and lows, punctuated by the experience of competing for the Wal-Mart media business twice. It won the first time but then lost in the re-do, which was sparked by the client’s belief that the first review was tainted by alleged misconduct on the part of its top ad executive, Julie Roehm, who was subsequently dismissed. Litigation between Roehm and Wal-Mart is ongoing.

Last year, Carat USA also lost its Pfizer Consumer Care account, with estimated billings of $400 million, without a review, after the unit was sold to Johnson & Johnson who then placed the account with roster shops. (Ironically, Carat won a huge piece of J&J’s European region in its recently completed global media review.)

Verklin defended Warren’s performance at the shop, saying, “He did a fantastic job.” Though Warren was one of the architects of the merger, “It’s just not what he wants to do next,” Verklin said.

—with Brian Morrissey