Hill, Holliday, Connors, Cosmopulos chairman and chief executive Jack Connors last week agreed to sell the agency he founded 30 years ago to the Interpublic Group of Cos. in a pure stock deal valued by analysts at between $70-100 million.
Terms of the sale call for the 55-year-old Connors to remain at the helm for a minimum of five years. Within the next two years, he expects to choose a successor from a group of senior agency executives he refers to as the Vermont Group (see story below).
Consummation of the deal ended years of on-again, off-again talks between Hill, Holliday and New York-based IPG, a publicly traded holding company that expands by purchasing ad agencies and other marketing services companies. While industry analysts said revenue growth for IPG was the primary reason for its interest in New England's second-largest agency, IPG senior vice president Barry Linsky acknowledged, "It's sometimes a question of timing and who is interested in having discussions with us at any given time."
Hill, Holliday has seen 25 percent growth for the past three years in part by expanding into new service areas such as direct, database and interactive marketing and by focusing its new business efforts primarily on three industries: healthcare, financial services and high technology.
Connors predicted that IPG's resources would function as a "booster rocket," helping to propel Hill, Holliday into new business opportunities previously not open to the $600 million agency because of its inability to land or retain clients that require international capabilities.
Among the first companies to test the Boston agency's international capabilities is Billerica, Mass.-based Wang Laboratories, which next month will launch a repositioning campaign to introduce its new name, Wang Global, Connors said.
Conversations between Hill, Holliday and IPG were initiated by Connors last fall after he "realized that I was now playing with my children's money," he said. As the majority owner, Connors and his family will be the greatest beneficiaries of the deal. By making the deal in stock, Connors said he stands to make more money than if he had to pay income taxes on cash received.
According to Connors, the decision to finalize the sale was predicated on several factors, including favorable market conditions, a decrease in the capital gains tax from 28 percent to 20 percent last year and IPG's solid track record and reputation for granting its agencies autonomy.
"This is the manifestation of consolidation in the ad industry," Connors said of the deal. "We are not going to change who we are . . . We are going to continue to be who we are. We're not going to Cincinnati to pitch Procter & Gamble."
The buyout, expected to be completed by the end of March, marks the second major acquisition in New England for IPG. Last year, IPG-owned McCann-Erickson Worldwide bought The Weber Group in a deal valued at $15 million.
Both Connors and Weber chairman Larry Weber said even though they are now part of the same entity, there has been no discussion of merging the two agencies. Weber reports to McCann chairman John Dooner, while Connors is now responsible to Interpublic chairman and chief executive officer Philip Geier and chief financial officer Eugene Beard.
Connors, who insisted as recently as two weeks ago that his shop was not for sale, said it was important for him to "control the story," even if it meant lying to reporters. "I needed to protect my family's interest."