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Duffy Leaves Publicis Fold to Go It Alone

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Fallon cites problem of conflicts; others say issue was cost-cutting

CHICAGO Pat Fallon and Joe Duffy have been friends for nearly 40 years and business partners for half that. But the two are ending their business relationship due in part to what sources described as a cost-cutting initiative.

Last Friday, the two executives confirmed the split but denied Publicis Groupe CEO Maurice Lévy was behind the separation. Yet several sources said Duffy Design historically is unprofitable and that Publicis is pressuring Fallon to improve its bottom line—a scenario Fallon vehemently denied.

"There has literally never been a word [about that]," said Fallon. "Money has never been an issue here."

What is at issue, according to Fallon, 58, and Duffy, 55, who revealed the separation to the agencies late Friday, is that the growth potential for Duffy's design unit has been stifled because of its affiliation with Fallon.

As the advertising agency added clients, Duffy found itself locked out of business opportunities because of conflicts by association, Duffy said. "Everybody else has run from us because of Fallon," he said. "Client conflicts have become more difficult to deal with."

"For Duffy to reach its full potential, it needs to be independent," Fallon said. He pointed to categories such as airlines and automotive in which Duffy did not have business but was systematically ruled out because of Fallon clients United Airlines and BMW of North America.

"It doesn't even have to make rational sense," Fallon said. "Joe won't have to fight this as an independent."

Fallon denied any financial pressures from Paris-based Publicis to jettison Duffy, noting that the operation had turned a profit at times but conceding that "like any company, it's had its ups and downs."

Duffy's value to the agency was more intangible, Fallon said. "It's had enormous contributions beyond profit," he said. "We've never felt any financial pressure, because we've known the value inside."

Still, sources said Fallon North America president David Lubars and global CFO David Dabill saw the unit as a way to cut costs. The two have been taking a larger role in managing the agency.

Fallon admitted that Lubars and Dabill (as well as Minneapolis president Rob White) had been consulted on the matter but insisted the ultimate decision was his and Duffy's. Lubars and Dabill were unavailable for comment.

Duffy, once a five-office global network, will remain in business as a single office of 12 staffers in Minneapolis. The new entity will be called Duffy & Partners. Along with Duffy himself, who will take the title of chairman, the executive team will include Duffy worldwide general manager Tricia Davidson and former Fallon worldwide COO Eric Block as co-managing partners. Duffy design director Dan Olson will be creative director.

Duffy's operations in Singapore, Hong Kong and London will be folded into the Fallon offices in those markets, while the New York operation will be shuttered. At its peak, Duffy Design employed roughly 50-60 people, according to sources, but the ranks have dwindled to less than half that.

Duffy & Partners opens with clients such as Sony, electronic stock-trading network Archipelago and the Bahamas Ministry of Tourism, all clients shared with Fallon. "It's not like we won't be working together," Fallon said.

Fallon and Duffy trace their business partnership back to 1984, but their friendship goes back to the 1960s. (Fallon even named a son, Duffy, after the designer.) "It's an emotional thing for Joe and I, because we won't be working together on a day-to-day basis," Fallon said.

Fallon and Duffy said they have talked on and off for several years about going in separate directions. But they decided to make a move now, because the issue of conflicts came up again as they reviewed Duffy's business plan for 2004. "It made us wonder how his business was being served," Fallon said.

During their 20-year history, Fallon and Duffy worked with several clients together, including Jim Beam Brands, Coca-Cola Co. and International Truck and Engine Corp. Duffy also had success working on other projects for blue-chip companies not on Fallon's roster, such as Kellogg Co. In the late 1990s, Fallon's interactive capabilities were also housed under Duffy when the work was mostly Web design. As the shop took on more programming aspects of the work (such as creating games and a Web-based film player for BMW), interactive became its own division.

Having been a part of Fallon since 1984, Duffy admitted some apprehension in striking out on his own. "Anything new is a little scary, but it's a little exciting to open new opportunities," he said. "If this was a startup or something new for me, I would be a lot less confident." - with Noreen O'Leary