Agency Execs Strike Deal Decade After Quelling Coup

Ernie Capobianco and Chuck Curtis worked together in 1992 to fend off a boardroom coup at Valentine Radford that sought to unseat Curtis as CEO. Once the uprising was foiled, Curtis took majority ownership of the 56-year-old shop.

Eleven years later, the two are teaming up again. In a deal initiated two months ago in a call by Curtis and expected to close Dec. 1, Capobianco’s Dallas-based holding company is acquiring VR in Kansas City, Mo.

In separate interviews, Capobianco, who left VR as CFO in 1993, and Curtis said the deal will give Square One access to VR’s strategic research, Internet and field-marketing expertise while offering VR more creative strength, along with the media expertise of Square One sibling Southwest Media Group.

Though the agencies’ assets will be combined, the shops will keep their separate names for at least a year, even when they partner on new-business pitches. During that time, new clients will be handled out of whichever office is closest to the client or requested by the client.

“We’re going to operate as one agency out of two offices,” said Curtis, who will become chairman of the two shops. “We couldn’t see any clear, obvious answer on the branding issue.”

The combined entity claims $250 million in billings (Square One, $200 million; VR, $50 million) and will employ 192. (About 140 are Square One staffers.) The deal comes at a time when both agencies seek to grow while maintaining independence.

In October, VR lost its cornerstone $60 million Bayer Corp. strategic planning, creative and direct mail account, siphoning off about half of VR’s estimated 2002 revenue of $22 million. The shop has gradually cut staff this year to about 50, from 167 a year ago.

Square One has also been hit with client defections. The agency lost Dave & Buster’s $5-7 million creative and media account to Fallon, New York, in August, and Whataburger’s $10-15 million creative duties to McGarrah/ Jessee, Austin, Texas, in April. (SMG kept that portion of the business.) Still, the shop claims billings of about $200 million and 2002 revenue of $18 million, up 14 percent from 2001.

“Certainly, [VR] losing our biggest client was one of the things that led to this,” Curtis said. Capobianco said his agency was having trouble getting in the door of larger, full-service pitches because its size. “To get into pitches for $40 million pieces of business, we need to be a critical mass, with the expertise of [VR] to allow us to compete and to have a better chance of servicing larger clients and picking up new business. This gives more horsepower,” he said.

Capobianco said the shops will be able to “overservice” clients of a certain size, specifically those under $40 million. “There’s no comparison to what we can do over a multinational,” he said.

The sentiment is expressed by any number of small to midsize agencies that have had to join forces in recent years due to the ad recession. But it does not hold much water with some industry observers.

“I think it’s hard to say a $10-40 million account is below the radar [for big shops],” said Abbott Jones, managing director of New York investment-banking firm AdMedia Partners. “A large agency like [J. Walter Thompson] would be very happy with a $15 million account.”

Capobianco remains president of One Square and will become president and CEO of both VR and Square One, the latter an open position. Bob Nichol will remain CEO of One Square and CEO and president of Southwest Media.

Layoffs are not in the immediate plans, but Capobianco said, “We’re always looking for efficiencies.”