MWW and Freud Buy Their Independence. Who's Next?
Charting the future of public relations
Holmes Report

MWW and Freud Buy Their Independence. Who's Next?

It’s hard to believe that some of their larger peers do not occasionally harbor the same dreams.

Paul Holmes

A year ago, one of my predictions for the decade ahead was that one of the large multinational public relations firms would attempt to buy itself back from its holding company parent.   I’m not sure either MWW Group, the New Jersey-based agency that was acquired by its own management from Interpublic, or Freud Communications, the U.K. firm currently in the process of a management buyout from Publicis Groupe, qualifies as a major multinational. MWW has fee income of around $40 million and one small office outside the U.S.; Freud generates fees of around £30 million ($46 million) and has likewise struggled to establish itself beyond its domestic market.   But both firms are clearly quality operations, and both have come to the conclusion that they are better off as independents. It’s hard to believe that some of their larger peers do not occasionally harbor the same dreams (in private, some of them will admit that they do) even if it would be much more difficult for a larger, global firm to put together the same kind of deal.   Public relations executives at all of the major holding companies—Interpublic, Omnicom, WPP and others—have the same complaints about their parents: the imposition of financial controls (many of them related to petty expenses) and benefits packages that discourage any kind of creativity; a focus on short-term financial results that makes investment hires difficult and often hinders growth; promised synergies and shared business that fails to materialize; the constant feeling of swimming against the tide that stems from an adversarial relationship between entrepreneurial agency leadership and bureaucratic management.   And the frustrations are likely to grow as public relations takes on a more central role in the marketing mix and becomes a more critical management discipline, yet continues to operate in an environment dominated by advertising people and advertising thinking—even as advertising ideas and advertising revenues continue to decline.   The biggest current problem, however, is homogenization. The big multinational agencies have all started to look and feel the same. Some may be stronger in particular markets, or in particular disciplines, but they all have the same structure, the same management philosophy, and increasingly the same culture—all imposed from above. The only firms that truly stand out in terms of any of those things are the independents.   That is, obviously, especially chafing for entrepreneurs.   MWW chief executive Michael Kempner, declined to discuss any dissatisfaction he might have had with the Interpublic management, but waxes lyrical about the response of agency management and employees to the buyout.   “When I told them what I wanted to do, they were ready to pop champagne corks,” he says. “Most of these people were with me before we sold and they hungered to get back to the exceedingly entrepreneurial culture we had back then, to the MWW way of doing things. Even the people who were new felt this surge of entrepreneurial energy, this excitement about working for themselves and having the freedom to make their own decisions.   “It’s very different to sit down and discuss growth plans and strategy with fellow owners, to pay people and reward them as owners, to work with them as owners. It’s going to make a huge difference internally, and externally in terms of client service.”   Kempner is confident that MWW will grow at an accelerated pace as an independent. The firm had fee income of around $30 million when it sold to IPG a decade ago, at the height of the dot-com boom. Its growth over the past 10 years has been much slower than its growth as an independent.   Says Kempner: “This is a time of unrivaled opportunity for MWW Group and for the public relations industry as a whole. The media and business landscape is continuing to rapidly change and PR is at the forefront of the revolution, helping brands and companies maintain relevance and build a level of trust that can no longer be earned just through traditional marketing and advertising. MWW is perfectly suited to capitalize on this opportunity and now is the time to return to our nimble, forward-thinking, client-centric and innovative roots.” The firm is expected to invest in expanding its already-impressive social media capabilities; in its consumer, corporate, and public affairs capabilities; in geographic expansion, both in the U.S. and key overseas markets; and especially in programs and benefits designed to attract and retain the best people.   “When it comes to investment decisions, there will be only one rule,” Kempner says. “If it makes sense for the business, do it. If it doesn’t make sense, don’t. We will focus on the only two things that matter in this business: clients and employees.”   Kempner says that putting together the buyout was not particularly difficult. It was financed through a combination of debt and equity. He will have a controlling interest in the independent agency, with about a dozen senior employees holding equity, and six outside investors—to be announced in the next week or so—making up a board of directors.   But he acknowledges that it was easier for a smaller firm—MWW was “not a core business” for Interpublic, he admits—than it would be for a larger firm, which might have more difficulty aligning the entire management team behind an MBO and persuading the parent company to do the deal.   Having said that, the people who lead and manage public relations firms will always have some leverage, because they are the most critical assets of the business. It’s likely that in a public relations agency boardroom somewhere, the senior executives of a top tier firm are looking at what MWW and Freud have done and asking: “If they can do it, why can’t we?”      

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Agency Management
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