IPG Merger: TM and Sedgwick Rd.

CHICAGO Interpublic Group has a history of merging agencies, whether it be big players like last year’s union of Draft and Foote, Cone & Belding, or smaller properties like Atlanta shops Austin Kelley and Fitzgerald + Co. in 2005.

Sometimes, like in the combination of Ammirati Puris Lintas and Lowe, the road is rough. Other transitions go more smoothly.

Executives at IPG agencies TM and Sedgwick Rd. are hoping theirs will fall into the latter category as they come together officially this week. In a deal quietly in the works for months, Dallas-based TM (formerly known as Temerlin McLain) will now absorb Seattle boutique Sedgwick Rd.

Both shops in recent years have lost cornerstone accounts (Subaru’s $165 million business left TM in late 2004, while Washington Mutual moved its $100 million account from Sedgwick Rd. in December 2005), and have since struggled to replace them. Executives at both agencies are hoping the combination will help them rebound.

“We’ve both been regional agencies for a long time,” said Jim Walker, president and CCO of Sedgwick Rd. “What it takes [to succeed] right now are more disciplines, more creativity and more talent.”

The merged agency will have about $460 million in billings and estimated revenue of $54 million. (Comparatively, TM had $428 million in billings and $51 million in estimated revenue for 2006.) TM’s Tom Hansen will remain president, while Sedgwick’s Walker will assume the CCO duties, unfilled since TM chairman and CCO Jim Ferguson left the agency in January 2006. The shop’s largest clients will be TM’s American Airlines and Nationwide, and the agency will operate under the TM name until a more fitting moniker can be finalized. “We’ve got a couple of [ideas],” Hansen said. “As soon as we can make it all work out [legally], we’ll be announcing them.”

Since losing their core clients, the two shops have struggled to regain their footing. While Sedgwick Rd. refocused on its creative product in the wake of the Washington Mutual loss, TM realigned its strategic and media disciplines into one integrated communications practice while keeping the agency’s account service and digital capabilities intact.

“Last year was a year … getting [TM] sorted out; we’re trying to build on that,” Hansen said. “We couldn’t have done this if we were the old agency. We’re not a big-account, service-driven agency anymore.”

Search consultants say the combination could be just the prescription to bring both agencies out of their doldrums. “I think TM has been one of the most underrated agencies in the country,” said Russell Wohlwerth, principal at ARK/AAI search consultants. “What TM needs is a little more creative juice. I think Jim and his company can provide that.”

Ultimately, the merger is a way of bringing together shops that each offer what the other lacks—creative from Sedgwick Rd. and account service from TM—in the hopes of sparking something new. “The merger brings together complementary cultures and competencies,” said an IPG representative in a statement. “We believe the combined entity will bring a stronger talent base and offering to existing and prospective clients.

That refrain has been heard before as smaller agencies within the holding company have come together. In 2000, for instance, when a struggling GMO was folded into Hill, Holliday, Connors, Cosmopulos, HHCC chief Jack Connors trumpeted: “By strategically combining resources, GMO will benefit by being able to more effectively service their clients with a broader range of marketing and communications services.”

Similar remarks were attached to other IPG merged shops: Austin Kelley and Fitzgerald + Co., 2005; Dailey and Suissa Miller, 2004; Long Haymes Carr and Mullen, 2001; and Gotham and LCF&L in 1995. While certainly not on the scale of the multiple corporate rollups that characterized Ammirati Puris Lintas and Lowe, these smaller regional shops nonetheless underscore the same strategic weaknesses of some of IPG’s past merger and acquisitions, combining underperforming agencies in the hopes of creating something great.

The difference between past experiences and present mergers, according to Hansen and Walker, is that these agencies and the principals are familiar with each other. For one thing, the two men have known each other for years, having worked together at Tracy Locke in the late ’80s when Walker was ecd in Los Angeles and Hansen was creative director in Dallas.

The two shops have also been working together unofficially since October 2006, after Hansen had been looking for someone to fill Ferguson’s job. After reconnecting at an IPG confab, Hansen and Walker found they shared similar experiences and perspective.

As a merged agency, the shop will keep its offices in Dallas and Seattle, and will work together through meetings, phone calls and Internet communication, Hansen said. Creative teams will be housed in the same office as the lead account groups that handle the business, though they’ll be able to draw upon agency resources in other offices.

Kristin Bloomquist, a senior partner at Select Resources International, said such familiarity would help the shop negotiate many of the pitfalls of other mergers.

“The fact that Jim and Tom are not strangers and have known and respected each other in the past goes a long way,” she said. “The two together are going to bring a depth of business and creative acumen together that will make them stronger than the sum of their parts.”