Agencies Scramble As Big Clients Merge

Disney and Fox. AT&T and Time Warner. T-Mobile and Sprint. While there have been numerous articles chronicling the various machinations to consolidate multibillion-dollar businesses under one mega-company, there has not been as much attention focused thus far on what happens to the agency partners servicing these accounts.

No matter what the headlines, there is no such thing as a "merger of equals," say agency review consultants. "There will never be co-CMOs," says Avidan Strategies' Avi Dan. "They aren't going to pay two salaries for the CMO position."

Mergers and acquisitions are primarily focused on cutting costs — or at least that is the argument made to shareholders — which means finding efficiencies between the two companies, whether it is through streamlining sales, HR or accounting. And of course, marketing and mergers usually result in a single marketing operation. 

"It does not make sense to have the duplication of marketing departments," states Mercer Island Group's Matt Driscoll. To further eliminate costs, merged companies almost as a rule cut away at the agency roster, looking at one single shop (or holding company), streamlining unnecessary overlap, and increasingly bringing work in-house. 



Dan does offer a caveat when it comes to target audiences, such as one agency concentrating on B2B while another oversees B2C efforts. "But when both agencies specialize in brand building, the likelihood is very slim [that a merged entity] will keep both."

In this game of musical chairs, there are strategies to help elevate one agency over a roster competitor. The incumbent agency at the acquiring company has the better chance of retaining the account. 

This played out with the Fox/Disney merger when OMD, which previously serviced Disney, beat out Assembly, which held the Fox business. Consultants all agree the CMO who remains in charge is likely to keep his or her agency partner. 

There is the question of whether these mega-merger agency decisions will be made internally or externally. Several search consultants believe, particularly in the short-term, most companies will select one agency in an internal review. There are too many other more important decisions to be made in immediate aftermath, they say. Selecting agency partners is one of the least important tasks on their to-do list. 

Even winning doesn't necessarily mean an agency is likely to reap any long-term rewards. All agency reviews are consistent. Regardless of industry, new CMOs typically hold agency reviews within six to 18 months of their hire, according to a 2018 Winmo report

Other consultants, however, predict the merged company will be forced to place the account in review as soon as possible due to stockholder pressure. After all, these executives are under heightened scrutiny to drive results and improve transparency. An internal review is too murky in today's aggressive activist culture, say analysts. 

Great work isn't sufficient to sway the client. McCann developed award-winning creative for OfficeMax and BSSP received accolades for its work for Mini. Both agencies lost their respective accounts after mergers. "You need an early warning sign so you are optimally positioned for any merger," explains Driscoll. "Agencies need to have hard conversations with their clients one-on-one."

Large clients, in particular, require so much creative and strategic work in the short-term that it is hard for an agency to step back and take a wider-view of the partnership.  "We aren't selling cars," says Driscoll. "We are in a people business," he says adding agencies must install "early warning signs."You need to focus on the relationship "years in advance" before there is even talk of an acquisition, he recommends.

While mergers are usually disruptive for at least some of the senior marketers and agencies involved, one silver lining is that displaced CMOs and other senior marketing executives will usually land somewhere else, enabling agencies who lose out in merger mayhem to potentially gain new business with those former partners down the road. "Best case scenario, you keep the business," jokes Driscoll. "Second case, five or six people move somewhere else and you land new accounts. There is no downside."



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