NEW YORK--An inability to reach consensus internally on terms of a buyout coupled with client defections and revenue declines led to the demise of Warwick Baker O'Neill, sources said last week.
News that the independent agency was shutting down left many observers wondering why the 62-year-old shop didn't sell out before folding. "There were a lot of conversations, but for one reason or another, they never panned out," said one executive.
As late as last year, EPB Communications (now Panoramic) signed a letter of intent to acquire the 55-staffer New York agency. The deal fell through due in part to EPB itself going through a restructuring, requiring additional funding from the Destination Group in Los Angeles, a source said.
In 1999 and 2000, Wolf Group held serious talks with the shop, sources said, but again, a deal never materialized.
Some attributed the failed deals to the competing desires of Warwick's top brass. Chairman and chief executive Wilder Baker, who was nearing retirement, was said to be looking to cash out, while president and chief creative officer Kevin O'Neill wanted to retain a full-time, top-level position.
"When you have two guys' names on the door, you're trying to satisfy the desires of both partners," said a source. "The role Kevin would play was always a discussion point, as to how substantial, how significant. ... Kevin's been No. 1 for a long time, and when you sell the agency, there's a likelihood that you're not going to be No. 1."
However, another source said Baker's high asking price thwarted discussions, which rankled O'Neill. "Kevin got frustrated that Wilder kept asking for more money than the agency was worth and Kevin wanted to sell," said the source.
Neither Baker nor O'Neill returned calls seeking comment.
Alan Hilburg, a Warwick representative, said, "The deals and conditions that both parties needed couldn't be met," referring to the agency and its potential buyers. He would not discuss specifics.
Just two years ago, Warwick had some accounts that made the shop attractive to suitors. But the bulk of the clients on the roster have sought ad expertise elsewhere. During the last year, the agency lost clients TSR Wireless and Fruit of the Loom after each declared bankruptcy.
Other client defections stemmed from the acquisitions of BestFoods, maker of Mazola and Niagra, by Unilever in June 2000, and portions of Drivers Mart by Republic Industries in 1998. The shop lost its $10 million Panasonic electric-shavers account in May and The East Coast Energy's $10 million business in March, following reviews. This month, Church & Dwight shifted its household brands to McCann-Erickson in New York. Warwick was left with a small piece of the Arm & Hammer toothpaste business.
One of its other clients, Reckitt Benckiser, went into review last week.
The only bright spot in 2001 came in February when U.S. Smokeless Tobacco Co. consolidated its ad assignments at Warwick, which had handled the company's Copenhagen brand since 1968.
In 1998, Warwick claimed 125 people and $188 million in billings. In 2000, it had estimated revenue of about $24 million. But on current billings of about $50 million, its revenue would be hovering at about $7.5 million, per industry standards.
Founded in 1939, the shop was known as Warwick and Legler. It serviced clients such as Timex, Heineken and Seagram's Crown Royal whiskey.
Its last day of business is Aug. 3. Hilburg said the shop is "trying to be as generous as it can" to its staffers.