or years, all the major holding companies knocked on Don Middleberg’s door. But the CEO of then Middleberg Associates turned them away. He flirted with selling his 160-person technology focused PR firm, but lucrative offers had to be balanced with chemistry and culture.

“My reaction was always no. But then it became clear that if we were going to reach that next level, we needed to join forces with a larger organization,” Middleberg says. In June, the agency, whose client roster includes Reuters, Sesame Street and IBM, became Middleberg Euro—after agreeing to be bought by Euro RSCG.

His shop is among many that have recently been acquired by a larger organization. In fact, there have been some 100 mergers and acquisitions since July 1999, up 70 percent over the same period last year, according to the Council of Public Relations Firms.

And the current consolidation climate shows no sign of slowing down.

Buoyed by a strong economy, the Internet and a new generation of CEOs who understand the relationship between PR and stock price, virtually all the big agencies and multinational holding companies, like Interpublic, Omnicom and WPP, have been riding the current M&A tidal wave.

Last year, Burson-Marsteller was overtaken by Omnicom’s Fleishman-Hillard as the largest agency in the U.S. when the St. Louis-based Fleishman made several significant high-tech acquisitions, including UpStart and Lois Paul. Fleishman claimed more than $181 million in U.S. revenue in 1999 vs. Burson-Marsteller, which finished last year with U.S. revenue just under $165 million. Another key move in 1999 was made by U.K.-based Shandwick International—it acquired The Cassidy Companies, a Washington, D.C., government relations and public affairs firm for between $60-80 million.

This year, the M&A activity is jumping.

Interpublic, the third-largest holding company, announced in late September that it was consolidating the offices and practices of its three major brands: Weber PR Worldwide, Shandwick International and Golin/Harris to form two global networks: Weber Shandwick Worldwide and Golin/Harris International.

“We had bought almost two dozen PR firms in the last four years. It was time to rationalize the brands and consolidate the power under the two brands,” says Larry Weber, chairman and chief executive of IPG’s Allied Communications Group, who becomes CEO of Weber Shandwick Worldwide.

Earlier this month, top-ranked Burson-Marsteller and Hill & Knowlton were officially united under the WPP umbrella when Y&R became a unit of the British holding company. Also a part of WPP’s PR family are Cohn & Wolfe and Ogilvy Public Relations.

Other significant shifts in the PR landscape include London-based Incepta Group’s $75 million purchase of Palo Alto, Calif.-based hi-tech PR firm Cunningham Communication in September. In July, Cordiant acquired Chicago-based marketing-services company Lighthouse Global Network for about $550 million. Incepta bought Sard Verbinnen, a New York PR firm specializing in investor relations, for $150 million in April. Lois Paul & Partners, a Burlington, Mass.-based PR firm, was purchased by Fleishman-Hillard in March for $15 million.

Jack Bergen, president of the Council of PR Firms, says the M&A fire is being fueled by four factors. First, he says, more and more holding companies have stock currency they can use as the pressure from their investors increases. “Because they’re public companies, they have to go out and buy, and PR is a safe sector,” he says. Second, they can go out and look at all the different marketing areas and see that margins and internal growth are spectacular in PR.

Then there is the access to competent management as holding companies gain talented CEOs through acquisitions. Finally, there have been many foreign buyers securing U.S. firms, providing them with an overseas presence.

Now, however, holding companies and agencies find themselves cash-ready for acquisitions yet face a diminishing field of independents.

Industry analysts like Abe Jones of New York-based AdMedia Partners predict the next targets will be smaller specialty firms in the areas of technology, healthcare, investor relations and public affairs.

“The reality is that the category is pretty well picked over at the mega-level,” he says. “The ones that are left are the relatively newer agencies that are specialized. What’s driving it is the same thing that has driven the ad business: a desire to be a part of a large public holding company in order to take advantage of the strong growth rates and high margins in the public relations industry, which in many cases are greater than advertising.”

Larry Weber agrees. “What you’re going to see in the next 12 to 24 months are far smaller PR firm acquisitions, and it’s already beginning. We’re moving into what I call a ‘hyper-practice’ area of the public relations business. It’s not just high-tech anymore, it’s an integrated circuit firm. It’s not just an entertainment firm, it’s a product placement firm. My prediction is that it will be the more entrepreneurial shops which will be gobbled up by the top 10.”

But how willing are these targets to take the plunge—and at what price?

“It’s sheer success that brings them to that point,” says Bergen. “Many of these people went out on their own either because they wanted to be entrepreneurs or they didn’t like the large agency world. And now they’ve succeeded.

“But when they hit around $8 million in revenue, they also reach a point where they need a larger infrastructure to support them. As a result, many are finding that it isn’t economical to build it themselves, which is why they are considering outside offers more seriously,” Bergen adds.

Yet for all of its benefits, selling can also be a risky proposition, argue some agency owners.

“To be fair, we are considering selling, but not in an aggressive way,” says Madeline DeVries, whose firm DeVries Public Relations currently handles Tupperware, Proctor & Gamble and Old Navy. “We haven’t made a decision. To really service our clients correctly, it might be helpful to either acquire or get acquired, although that’s not the real issue. For us, it’s more about being able to grow the business properly with the right staff.”

Others like Alan Kelly of San Francisco-based Applied Communications are weighing their options even more carefully. “Many of the usual players have come around curious to know of our interest, and they’re always pretty interesting exchanges,” he says. “We don’t harbor any plan to sell this company, but we have happily and politely listened.”

“The right question is not who the next two or three hottest targets are,” says attorney Mike Laskey, whose firm Davis and Gilbert specializes in PR firm acquisitions. “It’s really who isn’t, since all the large public buyers and major firms are looking for acquisitions of quality.”

Adds Weber: “What you’re going to see with PR is much like what happened with the giant accounting firms: more industry consolidation and adding more services until we have our own version of the Big Six.”

Of course, there’s still some major holdouts.

“We’re certainly of a size, scale and diversity that we don’t have any need to sell,” says Richard Edelman, president and CEO of the world’s largest independent agency, Edelman PR.

“In fact, it runs exactly counter to our strategy. Which is that the world is moving to a public relations-centric model and away from an advertising-centric model.”

Tripp Whetsell is a freelance writer based in New York whose articles have appeared in the New York Post and The Boston Globe.