Agency Decides It’s Too Tough to Be Alone Amid Globalization
CHICAGO–Publicis chairman Maurice Levy called Pat Fallon last July with a proposal that was quite different from the one that resulted in Fallon McElligott’s sale last week.
The Frenchman wanted to merge Fallon’s operations with Publicis’ U.S. network, which includes Publicis & Hal Riney offices in San Francisco and Chicago and Publicis offices in New York and Dallas. Pat Fallon would be in charge. “I wanted Pat as my partner,” Levy said.
Initially, Fallon wasn’t even going to return the call. Publicis had approached him before, and he wasn’t interested. But he was persuaded to listen by Fallon board member Laurel Cutler, who knew Lƒvy from her time on the True North Communications board.
“I thought these two men would really understand each other’s level of character,” Cutler said. “Maurice is a fantastic businessman. Even [former TN CEO and Levy antagonist] Bruce Mason had to acknowledge that.”
“She said I’d be crazy not to meet with him,” Fallon said.
A lunch was arranged in Minneapolis, and while Fallon found Lƒvy intriguing, he didn’t take to the proposal and left thinking nothing would come of it.
Lƒvy called again a few weeks later. “On his own, he came to the conclusion that the best idea would be to keep us focused on our brand,” Fallon said.
“When I saw the fantastic enthusiasm Fallon has,” Lƒvy said, “I realized a second network would be a part of my discussion.”
The deal, consummated last week, makes Fallon a separate international brand under Publicis.
Fallon said he spurned a Publicis buyout offer three years ago,
but has since learned just how difficult it is to grow globally as an independent. The shop opened a London outpost in 1998, but expansion there is going slower than expected, Fallon admitted.
“It’s a slow procedure when you’re an independent agency with limited resources,” he said. “We had some decisions to make, and we saw opportunities we couldn’t capitalize on.”
With the help of Publicis capital, Fallon now foresees building a network of 10-12 offices worldwide at a rate of one or two a year. The agency has been scouting around Latin America and Asia–and keying on Brazil, Hong Kong and Singapore, sources said.
Sources put the sale price at $100-120 million. Fallon, with a third office in New York, estimated its 1999 billings at more than $700 million, with 1998 revenues of $69 million.
Fallon denied the agency had been actively shopping for a buyer. Unsolicited offers have been turned down, he said.
“Everyone else was interested in our revenues; [Lƒvy] was interested in what makes us tick,” he said. “I give him credit. He took [his initial proposal] off the table on his own and connected with the values that are important to us.”
Though one industry source suggested it would be “naive” to think Lƒvy will not meddle with Fallon, Scott Marshall, president of Publicis & Hal Riney, San Francisco, said his experience has been the opposite.
“Maurice has been true to his word,” Marshall said. “We have been given total autonomy. He has not inserted himself or asked us to do anything we didn’t want to do.”
In Pat Fallon and Hal Riney, Lƒvy has now successfully wooed two of the more iconoclastic personalities in the business. The appeal to the independents, said one source, is there’s no real competition within the Publicis network.
“There’s no one much bigger at Publicis, so that’s attractive,” the source said. “All the divisions are kind of equal.”
Another source added that with the recent flurry of holding company deals, there’s not much left to buy, which helps explain why the Fallon price is substantially higher than the estimated $60-70 million Publicis spent on similarly sized Hal Riney & Partners in 1998.
Yet Publicis’ U.S. acquisition spree, including the recent purchase of marketing services firm Frankel & Co. in Chicago, has left some in the industry wondering about Lƒvy’s strategy. Said one executive, “WPP is a brand. When they make an acquisition, you get a sense of why they’re all together. Here, there is no brand.”
Lƒvy, whose ambitions in the U.S. remain unsated, has maintained there is a method to his buildup of agencies, which also include the former EvansGroup in Seattle and a 49 percent stake in African American shop Burrell Communications in Chicago.
“We’re not just collecting agencies. We are building a network,” Lƒvy said. –with staff report
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