The Bank Breaks For Two Agencies

Last year the 4A's counted more than double the average number of agency closings, and while an ad industry rebound is expected in 2003, two well-established agencies fell victim to the ad recession last week. Sources said other small agencies may not survive if business fails to turn around soon.Ten-year-old agency Hampel/Stefanides in New York and HDC in Fort Lauderdale, Fla., in business for 23 years, have shut down. The average closures per year since the 1980s has been eight to ten shops, said John Wolfe, director of public affairs for the American Association of Advertising Agencies. But last year, 17 of the group's members went out of business, the majority of those small to midsized shops with gross incomes of less than $10 million, Wolfe said. "It's a matter of the strong and the smart surviving," said Amy Hoover, vp for the Talent Zoo, an Atlanta-based recruiter that specializes in ad agencies. "Although the smaller shops are more vulnerable—and we're continuing to see shakeouts from the past two years—this is not simply a matter of the big agencies crushing the small."A common scenario is that agencies take on more business and staff up, then lose the business and crash, Hoover said. One key to survival, she noted, has been "innovative leadership who didn't look to clients that would primarily enhance a presupposed image."Hampel/Stefanides was a victim of its financially strapped ad holding company, Toronto-based Envoy Communications. The agency had been looking to free itself from Envoy since last fall and held talks with four shops regarding a sale [Adweek, Oct. 28]. A buyer failed to materialize.The shop launched in 1993, after creative directors Dean Stefanides and Larry Hampel left Scali, McCabe, Sloves in New York. Envoy bought the agency in 1998 as a way for the company, mainly known for its design holdings, to expand its traditional advertising offerings. Hampel/Stefanides was Envoy's only U.S. outpost; it made an unsuccessful bid to purchase Leagas Delaney in June 2001.Two weeks ago, Envoy pulled the plug on Hampel/Stefanides. (Envoy reported a 28 percent decline in revenue for the nine months ending June 30, to $29 million, compared with the same period a year earlier, according to Securities and Exchange Commission filings.) At its demise, Hampel/Stefanides claimed as clients BASF, Steve Madden and Aer Lingus.Sources said the pair was talking with Bill Tucker, head of New York agency Tucker Partnership and a colleague of Hampel and Stefanides at Scali. Tucker's biggest client is Quaker State. The executives were not available for comment. HDC, formerly Harris Drury Cohen, peaked in the late 1990s. In 1998, billings rose 65 percent to $88 million, and by 1999, billings were close to $100 million. The roster included sport boat manufacturer Sea-Doo, Levitz Furniture Stores, Color Tile and Celebrity Cruises. Toward the end, however, the agency claimed less than $60 million in business from such clients as the Florida Marlins, Alabama Power and a project from Hershey International. Sources said the shop had overextended itself by moving into larger offices and that it failed to replace lost billings through new business. CEO Michael Goldberg was unavailable for comment.Founding partner Stan Harris, who left HDC in December and now runs consultancy Harris Ideas in Plantation, Fla., confirmed that the shop closed but would not comment further on its demise. He has hired one former employee and is considering another.Sources said Goldberg will join Zimmerman and Partners in Fort Lauderdale as chief marketing officer. Alabama Power Co., a subsidiary of the Southern Company in Atlanta, will move the creative portion of its $6 million account to Zimmerman, sources said. Alabama Power did not return phone calls. Zimmerman CEO Jordan Zimmerman also did not return calls.Several HDC staffers are expected to make the transition with Goldberg, including group creative director Mike Cannon.

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The Bank Breaks For Two Agencies

Alicia Griswold

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Alicia Griswold