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Fallon's French Connection

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After Scrapping 1st Plan, Levy Offers to Make Agency 2nd Net
CHICAGO--Last July, Publicis chairman Maurice Levy called Pat Fallon to discuss 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," Lƒvy said.
Initially, Fallon was not 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 last week. "Maurice is a fantastic businessman. Even [former TN CEO and Lƒvy antagonist] Bruce Mason had to acknowledge that."
"She said I'd be crazy not to meet with him," Fallon added.
A lunch was arranged in Minneapolis, and while Fallon found Levy intriguing, he didn't embrace the plan 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 stated.
"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, calls for Fallon to operate as a separate international brand.
Fallon, 54. 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 some say it is naive to think Lƒvy will not meddle with Fallon, Hal Riney said Lƒvy hasn't interfered with his shop.
"We don't have a lot of conversations with Publicis, and we don't expect to," Riney said. "The agency operates as it always has. That has been our understanding from the beginning, and I think it is in their best interest."
In Pat Fallon and Hal Riney, Lƒvy has now successfully wooed two of the most independent
personalities in the business. Apart from the obvious benefits of "cashing out" and expanding resources, observers say the appeal of Publicis is that there are few creative gems within the network threatening to outshine the newcomers.
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 shop Frankel & Co. here, 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 include the former EvansGroup in Salt Lake City 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. "We are admen and entrepreneurs, trying to build agencies." --with staff report