Arun Sudhaman 01 Apr 2015 // 1:00PM GMT
MOSCOW—Edelman is to shut down its Russian operation in favour of an affiliate deal with local firm PRT.
The move comes amid challenging economic and geopolitical conditions in Russia, which have affected MNC PR budgets in the country.
Edelman entered Russia in 2008, via the acquisition of local firm Imageland. However, that presence soon grew troubled, and was liquidated in 2012, with Edelman relaunching as a much smaller wholly-owned operation.
Since then, though, Russia's PR market has struggled amid the Ukraine crisis and ongoing economic sanctions, causing investor confidence in the country to plummet in recent months.
Edelman's Russian presence has dwindled to around 15 staffers, from 23 two years ago, and 55 before Edelman Imageland shut down. The firm is hoping to transfer existing staff and clients to PRT, an established 75-person local PR firm that works for such clients as Unilever, Diageo, Bayer, BSH Group, Pirelli and Kia.
Edelman Russia GM Kerry Irwin, who took charge of operations in mid-2012, will manage the transition to PRT. Edelman Europe/CIS CEO Michael Stewart added that the "hope" is that Irwin will remain with Edelman, "obviously outside Russia."
"Although the economic situation in Russia has made business increasingly difficult, client demand remains strong and we remain deeply committed to serving them in the Russian market," said Stewart. "This partnership with PRT enables us to serve clients at scale immediately."
Edelman is not the only international PR firm to find the Russian environment difficult in recent months. Ketchum recently ended its relationship with the country's government, with the firm's Russia head Michael Maslov telling the Holmes Report that he doubts the country's PR market will grow this year.
Maslov, pointed to sectors such as travel, consumer goods and automotive as being particularly affected by the sharp devaluation of the Russian ruble last year. "Budget cuts in these sectors were up to 30 -40%, or even higher."
"From what I know most of the international PR firms that have offices in Moscow are holding strong – they’ve been long enough in Russia and built good stable businesses," added Maslov. "Of course, all of us are affected one way or another, but I haven’t seen any signs of panic."
A recent Echo Chamber podcast explored the challenges in Russia's PR firms. International PR firms began entering the country in earnest around the time of Edelman's Imageland acquisition, but several have opted for affiliate deals rather than an equity presence.
"You couldn’t be a global company at the time without going into Russia — all our clients wanted us in there," one senior agency executive told the Holmes Report: "It's very hard, as the geopolitical situation is not going to get better. We should probably get out now, but no one wants to be the firm that leaves."
Stewart noted that PRT would be able to offer the kind of integrated communications capabilities that Edelman had been unable to build in the country. "They have the creative, digital and storytelling skills to ensure we will bring Edelman clients depth of local knowledge to world class communications marketing campaigns," he said.
"We are hugely grateful to the employees in our current office, for their hard work and professionalism and we hope to transfer them where possible."