McKinsey Helping Bell With Grand Plan at IPG

Consultants working to advise on restructuring of company's assetsA team from McKinsey & Co. is currently making a second round of visits to financial executives at agencies within Interpublic Group in an effort to identify ways to implement new financial efficiencies and streamline costs, sources said. The consultants were first brought into IPG about six months ago by then-new COO Chris Coughlin. IPG has also asked McKinsey to evaluate the holding company's portfolio of corporate assets to see what can be done to "resize, right-size" its operating units, according to one source. Many of those entities were brought into the company in the late '90s, in a flurry of acquisitions by former CEO Phil Geier. "There's no integration there," said a source. Some restructuring could occur by midyear. Following this second round of meetings, McKinsey will make recommendations to IPG CEO David Bell, who will decide what to run past the company's board. "McKinsey's charge here is not to talk about selling assets. That's a long shot, although that's not to say it couldn't happen if it brought out a lot of costs," said one source. Said another: "This is primarily financially driven, but if [McKinsey] comes across something smart strategically to do, [IPG] will consider it." Bell and Coughlin were both traveling late last week and unavailable for comment. Representatives at IPG and McKinsey declined comment. Another key focus for McKinsey at IPG has been the development of a new set of financial metrics, which are expected to be discussed in the conference-call release of fourth-quarter earnings March 9. Coughlin, who added CFO responsibilities last August after Sean Orr left IPG, withdrew the company's previous financial guidance in August, when it reported second-quarter earnings. "We do not believe it's in anyone's best interests for Interpublic to continue to provide [earnings per share] guidance," he said at the time. "Having been here only six weeks, I need to have more in-depth knowledge of the company and its people, as well as more confidence in our systems, before I stand in front of you and tell you with confidence what we can deliver." He cited a "complex and disjointed organization" that had been created through the acquisition of hundreds of companies run by "first-generation entrepreneurs, whose support staff seldom had the functional expertise to manage in a global, public-company environment." Last week, Lauren Rich Fine, an industry analyst with Merrill Lynch, identified some of Coughlin's priorities in a report she wrote after an hourlong first meeting with him. "He appears instrumental in the process of changing the culture from being focused on the accounting versus cash impact of decisions," she wrote, calling him the "Cash King." She also said IPG plans to roll out a new employee-incentive plan based on organic-revenue generation, margin improvement and cash generation. Fine's report reflected Wall Street's continued worries about IPG's Lowe. She voiced concerns that "IPG is disadvantaged, given that it has only one healthy global agency." She said that while "McCann Worldwide is still a global powerhouse, for years Lowe, which was the combination of Lintas and Lowe, has been in decline and is a much smaller network today. ... It is remarkable to think that Lintas and Lowe each separately were [once] considered large global networks." Coughlin, in response, she said, "appreciates the impact of perception in a service industry, as Lowe has had several large clients put their business up for review." McKinsey's work at IPG signals Bell's readiness to make his impact on operating units in the holding company, whose top job he assumed nearly a year ago. In that year, he has focused on meeting with clients and IPG agency executives while focusing on improving communications with Wall Street and raising the cash to retire two convertible debt issues. "This is the natural next phase," said one observer. "It's time to take action, take out costs, establish financial reliability and get margins up to the industry standard." - with Andrew McMains and Kathleen Sampey

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McKinsey Helping Bell With Grand Plan at IPG

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