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After Two Years, IPG Pulls Plug On Burns & Co.

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Two years after launching with a controversial bang, Saatchi & Saatchi breakaway shop oneseven ended with a whimper last week when Interpublic decided to pull the plug on the underachieving agency.

On Friday, the holding company confirmed the divorce. "We have finalized decisions regarding separation from oneseven," said an IPG representative. "They are a talented group of professionals and we hope some will find opportunities within the group; others have chosen to go forward independently."

The move comes nearly two years after IPG provided safe haven to a group of 17 staffers who walked out of Saatchi & Saatchi en masse on Feb. 14, 2005, three days after the abrupt exit of Mike Burns, worldwide account director on General Mills.

IPG, at the urging of its then co-chairman David Bell, hired the renegade group with the strong expectation that General Mills business—which Burns had worked on for 25 years—would follow. But those expectations never materialized.

And despite oneseven's positioning as an expert in brands associated with youth, families, health and wellness, it failed to gain any significant business in those categories.

At the time of its split from IPG, oneseven's client roster included ConAgra Foods' Hebrew National, McGraw-Hill's BusinessWeek, Gorton's, Dun & Bradstreet and Unicef. According to TNS Media Intelligence/CMR, those clients collectively spend a total of about $30 million annually in major media; revenue is estimated at $1 million. However, salaries for the agency's seasoned employees and Burns, who serves as chairman of the agency, are believed to exceed $5 million.

Burns on Friday said: "Over the past 18 months we've built a solid agency foundation for onseven with our client partners. We're now looking forward to growing our business with an independent focus and an entreprenuial energy." Agency CEO Anne Adriance could not be reached at press time.

Oneseven occupied the midtown office space of sister shop Lowe. All but one of its creative and account-planning staffers had worked on General Mills at Publicis Groupe's Saatchi in New York.

Saatchi, however, restaffed the account and, to date, the shop's New York office has not lost any of its "Big G" assignments, which include Cheerios, Pillsbury, Wheaties and Yoplait.

In March 2005, Saatchi sued Burns in New York State Supreme Court, alleging that he orchestrated the exodus of the Saatchi 17. The suit accused Burns of breach of fiduciary duty, breach of the duty of loyalty and breach of contract.

In court papers Burns countered that Saatchi had failed to show damages—noting that the agency hadn't lost any General Mills brands—and argued that the suit should be dismissed. Judge Herman Cahn declined to throw out the suit, but did narrow its scope and reject a Saatchi request for an injunction that would have hindered Burns' ability to work in the business.

The case lingered until July 2006, when the two sides settled out of court for an undisclosed sum. At the time, Burns said, "I'm now excited to create the future with oneseven—IPG's newest agency—which was uniquely designed to provide brand leadership and competitive advantage in this time of great marketing change, complexity and opportunity."

The shuttering of oneseven comes as IPG looks to shed unprofitable units as it struggles to deliver on aggressive turnaround promises to Wall Street. Just three weeks ago, IPG disbanded its eight-person Consumer Experience Practice, which ex-media chief Mark Rosenthal started last year.

IPG's turnaround goals include achieving peer-level revenue growth and a double-digit operating margin by 2008. Industry analysts, however, are skeptical about the time frame, given the company's negative margin at the end of September and third-quarter organic revenue growth of just 2.7 percent.