Paul Holmes 08 Jun 2001 // 11:00PM GMT
LONDON, June 8—Lots of public relations agency founders proclaim the benefits of independence—right up to the day they sell to Omnicom or Interpublic. But Alastair Gornall, founder and chief executive of London’s Consolidated Communications is walking the walk to match his talk, selling his controlling stake in the firm to a management team consisting of six senior executives, led by managing director Sarah Robinson, who has been with Consolidated since its launch in 1990.
The deal was financed through a management buyout that valued the company—which has annual fees of around £5.5 million—at around £8 million, with financing from the management team, employees, Lloyds TSB Bank, and Close VCT Management. Gornall knows he could probably have gotten a better price had he sold to one of the giant holding companies, but says it was important to pass the firm on to a new generation of leadership.
“From day one we have always been totally passionate about our independence,” Gornall says. “We have always believed that our independence allowed us to put people first, and if we put our people first they would look after our clients, and our clients would look after our shareholders. That philosophy runs through everything we do.”
With a staff of 100 and a client list that includes Budweiser, Virgin, Audi, KLM and Blockbuster, Consolidated is one of the U.K.’s leading independents, and Gornall says he has fielded offers from several major holding companies. In most cases, he says, the deal-breaker was concern that the cultures would be incompatibility.
“I was always concerned about the potential that the acquiring company would not respect the way we treat our staff,” he says. All of the employees at Consolidated are participants in an employee stock ownership plan, and receive individualized training programs. The firm’s vacation policies are among the most generous in the industry, and it offers sabbaticals after just two years.
The recent downturn in the PR market only reinforced Gornall’s determination to see the firm continue as an independent even as he sought an exit strategy. “When times get tough, one of the first things the giant agencies do is look to cut staff,” he says. “My view is that’s one of the worst things you can do. It’s better to take a financial hit for the short-term but hang on to your great people, because they’re the future of the business. If you’re owned by one of the big publicly-traded companies, you may not be able to do that.”
There’s nothing particularly unusual about that perspective—it is probably shared by the majority of the entrepreneurs in this business. What is unusual is that Gornall was able to find a mechanism to cash out without compromising his beliefs.
“In the time I’ve been in the PR business I can only remember one other time in which a firm was passed from its owner to a new generation of employee-owners,” says Gornall. That firm was The Quentin Bell Organization, later sold to Chime Communications. “The fact that we were able to do this is a tribute to the incoming management team. They have gained the confidence of top notch merchant banks who are backing this deal.”
According to Patrick Reeve, managing director of Close VCT, “Consolidated typifies the sort of business that we are looking to invest in. It’s a profitable, dynamic, well run and well respected. We have had an eye on this sector for a while, but no other PR companies have made the grade.”
The new management team comprises Sarah Robinson, who will be managing director; PR directors Katie Hatfield, Will Holt and Rachael Sansom; public affairs director Ed Vaizey; and financial director Stephen Marsh. Gornall, meanwhile, will spend about 25 percent of his time on Consolidated business for the next two years. He says he’s still figuring out what he’s going to do with the other 75 percent.
Says Robinson, “These are invigorating times. We’ve got a great bunch of people, a top client list and a culture second to none. We aim to build on our year on year growth, boost profitability and develop the agency into the U.K.’s premier independent.”