IPG’s Michael Roth on the Deutsch-Lowe Union

NEW YORK Interpublic Group CEO Michael Roth explains why he’s bullish about the union of Lowe and Deutsch, unfazed about having three direct reports from one agency (Michael Wall, Tony Wright and Linda Sawyer) and still skeptical about talk of a marketplace recovery. Roth, in an interview with senior reporter Andrew McMains, also weighs in on McCann Erickson, R/GA and General Motors.

Adweek: Why do you think this merger will work when, historically, these things have been a tough row to hoe?

Roth: We understand that that has always been a problem with prior mergers and we were very careful to make sure that we don’t get tripped up. First of all, I think the cultures of the two organizations are very similar in terms of client focus, client service, creative ideas and really having an impact on the client’s business. That culture is consistent between the two of them. The other [thing] is that we have people in place that are excited about it and see the opportunity [for what it is].

This was not a forced alignment; this was something where both parties sat back and said, “You know, this makes a lot of sense.” Certainly, it expands the marketplace for Deutsch in terms of potential global clients. And [with] Lowe, we’ve been looking to beef up its North American and particularly New York presence, and this was perfect. The responsibilities are very clear in terms of who is responsible for what areas. So, I think we’ve really crossed the t’s and dotted the i’s to make this a success. And the clients that I’ve spoken to believe it as well.

Who have you spoken to?

I won’t tell you which clients (laughs). But I can assure you that there are clients out there that view this as an opportunity for them as well. It’s a good transaction.

Why the sensitivity around the word merger?

The reason we’re staying away from the word merger, candidly, is that in the past these mergers haven’t worked. We think we have a model here that frankly is really an alignment as opposed to a merger. And that is with Linda having responsibility for North America — all the Lowe business here as well as the Deutsch business that she had before. That doesn’t feel like a merger as much as an alignment between the U.S., North America and Lowe on a global basis.

You hear what I’m saying, right? In the business world, combining p and l’s is a merger.

No, I understand. But I think it really feels more like an alignment, so that’s why we’re calling it that. It sort of fits what we created here.

Why do this now?

Well, we’ve been talking about it for a while. And because . . . when this economy turns around, there are going to be a lot of global opportunities and opportunities here in the United States. We want to make sure we have the best offerings within IPG to meet that demand.

How are you going to manage three direct reports out of one agency?

Oh, I have thousands of direct reports (laughs). My view has always been that any one of our people has an opportunity to call me, meet with me and [discuss] whatever they want. So, this isn’t anything different than what we’ve had before. 

You hear what I’m saying though, right?

What’s important here is the time and effort that went into what will make this work. This whole issue of how do we manage three direct reports really isn’t an issue here. Linda has always had access to me, as has Tony and Michael Wall. So, that basically continues. Everyone knows their responsibilities and everyone knows what has to be done. I’m very comfortable with that.

Like Deutsch, do you think that R/GA should be a global player as well?

Well, we are in fact expanding R/GA’s global footprint. They’ve opened an office in London [and] we’re looking at other locations. There are different ways of expanding globally. You can do it organically, you can do it by alignments and you can do it by mergers.

Does the agency’s global MasterCard win give that more impetus?

[R/GA CEO] Bob [Greenberg] has always been the kind of guy that goes into markets where he knows he’s going to have a business and a client. Between Nokia and MasterCard, that certainly helps a lot.

There’s debate in our industry about digital shops: Do you keep them separate or do you integrate them into general market agencies? How do you view R/GA in that regard?

Our approach to digital is a little different. We have our specialty agencies, whether it be R/GA, Huge — our recent acquisitions — [or] MRM. Also, all of our agencies have digital capabilities. Deutsch, for example, has very strong digital capabilities, as does Lowe in its alignment with Huge. So, I think it’s to fit the bill. You look at a Hill, Holliday, Mullen, Campbell-Ewald — they have great digital capabilities. It depends on the organization itself. And what we want to make sure is that we have access to all the IPG resources. So, if an agency feels it has to tap into R/GA, then they should be able to do so. I think R/GA, where it is, makes a lot of sense.

You like it as a stand-alone?

Yes.

With the Lowe and Deutsch move, aren’t you also being more creative by doing something within your means?

There are a few ways of expansion. You can acquire it, you can do it yourself organically or you can do what we did here in terms of the alignment. You look at what the possibilities are. Certainly this one makes sense and there’s no need for us to go out and buy a U.S. agency to fit with Lowe. Nor did we have to open up offices for Deutsch to expand globally. It just makes a lot of sense.

What’s ailing McCann these days?

(Laughs) Who says there’s something ailing McCann?

Well, it hasn’t been a glorious year for them.

Candidly, this business, I’ve learned now, goes in cycles. I’m very comfortable with McCann, their go-to-market strategy, their people. They were winning a lot of business at one time — and then at another time, it slows down. They are a global force in the marketplace. There’s no question about it. And this will turn.

Can you put your finger on what the agency might need?

We’ve focused on talent. . . . We recently added [North American president Robert] LePlae — he’s a great addition — and some creative people along with him. Where we see we have needs, we go out and we get them.

Has your outlook changed on the second half or 2010? Are you any more optimistic than you were a few months ago?

Well, I’m optimistic because I’m reading a lot of people who think things are getting better (laughs).  . . . There’s a fair amount of confidence that’s beginning to build, which is good. And that will ultimately convert into a stronger recovery. Right now I’m still very cautious about the rest of the year. And I think 2010 will be an improvement over 2009.

Can’t get any worse.

Exactly. But I just don’t know how strong that recovery will be. So, we’ll be cautious about that.

You get any insights from clients on that?

Yes, they’re all waiting and watching. I’m not raising any big flags in terms of, happy days are here again, but I do think the worst is behind us.

Does it frustrate you that you can’t get additional General Motors business without a review? I’m referring to Cadillac.

Look, the marketplace is what it is. This is not unusual. We’re seeing a lot of companies do that. We’re very comfortable with our offerings. We’re delighted that Campbell-Ewald continues as agency of record [on Chevrolet]. As far as Cadillac goes, we’ve been doing work on Cadillac already and I think we’re very well positioned to win the business. We’re prepared to show what we’ve got.

What do you say to the naysayers who have seen Lowe struggle with mergers in the past?

This is a different IPG. It’s a different management team, frankly. It’s different leaders at the various respective businesses that we’re talking about. And this isn’t your father’s IPG. This is a new company. We’ve shown that we can deliver in terms of the turnaround that we started a number of years ago. Draftfcb was another great example. The naysayers were there about that one and last quarter Draftfcb was among our best performers. It works when it’s done well and the right people are doing it.

What’s a reasonable amount of time to gauge the Lowe-Deutsch effort? Somebody told me six months.

I don’t know who told you that. I don’t have a crystal ball.

Tony Wright.

Is that what Tony told you? Well, if Tony says six months, then I’m going to hope it’s three months (laughs).

You’re the boss, right?

You bet.