Disruption is an annoyingly overused word in the marketing communications world. Yet it is a term that we must consider when we investigate BlueFocus’ acquisition of almost 20 percent of Huntsworth Group, a deal that, at least, could transform Huntsworth’s fortunes and, at best, disrupt the Western-centric manner in which the global PR industry has grown.
The first point worth noting is the difference that seven years makes. Because that is the length of time between the BlueFocus/Huntsworth deal announced yesterday and the UK holding group’s attempt to buy the Chinese PR powerhouse in 2006.
Back then, the Huntsworth deal — which almost reached fruition after a bidding war that also involved other major holding groups — fit the typical acquisition template. Established Western company buys plucky Asian upstart. Covering that story in Asia, I vividly remember one industry observer wondering when the tide of capital would turn. Frankly, given the size of Asia’s independent PR firms, I couldn’t see it happening anytime soon.
I’m happy to have been proved wrong by BlueFocus, whose £36.5m investment into Huntsworth follows Japanese juggernaut Dentsu’s acquisition of a US agency earlier this year, as chronicled in this feature. It should be noted that this duo, who also have an existing JV in place, are effectively Asia's two largest PR firms; there are very few others - PRAP and Bilcom spring to mind - with the resources and desire to make a similar type of move.
Regardless, the BlueFocus deal provides a useful reflection of the rise of Asia’s PR industry and, indeed, further evidence of how macroeconomic trends favour that region at the expense of moribund European markets.
While Huntsworth has stagnated in recent years, BlueFocus has experienced meteoric growth, boosted by its decision to list on the Shenzhen Stock Exchange in 2010. The Holmes Report’s upcoming Global Rankings will reveal that BlueFocus posted fee income of almost $88m in 2012, an eye-catching 40 percent increase on its 2011 revenue of $63m.
In particular, BlueFocus has flourished by broadening its services to include such areas as digital PR and mobile, branded content and paid media. These are all skills that are relevant to any PR firm in the world, even if the specific Chinese context from which they arose is unlikely to apply in many other markets. It should not be forgotten, though, that BlueFocus makes much of its money from the commoditised world of Chinese media relations and must deal with the same ethical issues that confront any agency operating in the country.
BlueFocus CEO Oscar Zhao and Huntsworth CEO Lord Chadlington
So, is the BlueFocus/Huntsworth tie-up a seminal moment for the PR industry? Only time will tell. At the age of 70, with the glory years of Shandwick receding, Lord Chadlington has brokered a deal that suggests a level of audacity not always associated with the PR industry. His lordship, it appears, is not about to slow down any time soon.
On paper, at least, the alliance makes sense. One of the key reasons for Huntsworth’s poor returns in recent years is its over-exposure to Europe, and under-weighted presence in Asia’s high-growth markets, where its footprint pales in comparison to its network agency rivals.
The highest-grower of them all is China, where BlueFocus reigns supreme. Given that the BlueFocus China presence will continue to operate independently of Huntsworth, it remains unclear how the alliance will help the UK company in this critical market. I am reminded of Dentsu’s investment, on a much bigger scale, in Publicis Groupe, which rarely appeared to assist the French company’s agencies in Japan.
Neither did it appear to assist Dentsu’s overseas ambitions. Indeed, the Dentsu/Publicis venture may offer a cautionary tale. Most would suggest it foundered because of a lack of shared purpose. Notably, while Huntsworth and Blue Focus have made all the right noises, it appears that the alliance is close to recruiting a senior executive to lead its efforts in Asia-Pacific.
This, provided they find the right person, may prove pivotal. So will the war chest available to the initiative, once BlueFocus has made its £36.5m investment. You can probably blame Huntsworth’s struggles in Asia on a lack of investment; by striking this deal, Chadlington will finally be able to free up some much needed funds to back the alliance’s “joint expansion” into Asian markets.
BlueFocus CEO Oscar Zhao does not lack ambition - his agency has acquired a Hong Kong firm and opened offices in the Singapore and US - but he is probably savvy enough to realise that conquering London or New York is not immediately possible. His firm has built its business via a strong MNC tech practice in China; it can now attempt to build a credible offering for the many Chinese corporates that are looking to go global. Equally, a Huntsworth firm like Grayling could clearly benefit from being able to service expansionary BlueFocus clients in Asia and beyond.
Cultural factors should not be underestimated, even if Zhao and Lord Chadlington now have a relationship that stretches back for almost a decade. Huntsworth’s 2006 attempt to buy BlueFocus eventually failed because of a lack of cultural chemistry, although it is likely that the two companies share more common ground today.
Still, in plain black and white terms, the fact that a Chinese PR group has bought a stake in one the key Western holding companies appears fairly momentous. Like a good PR campaign, however, even if the strategy seems smart, much will depend on overcoming a variety of challenges - cultural, financial, operational - and ensuring successful implementation.
Our two protagonists are betting that they can pull this off, in the not-unreasonable belief that the deal can serve as a rallying point in Asia, convincing the region’s independent firms and talent that there is a new player in town. Everyone in the industry will be watching its progress closely.