Magazine article Marketing

Ritchie Signals Mergers Mania

Magazine article Marketing

Ritchie Signals Mergers Mania

Article excerpt

Last week's surprise union of TBWA Holmes Knight Ritchie and Hoare Wilkins may herald a spate of agency mergers unprecedented in recent advertising history if City predictions hold true.

Dozens of well-known agencies could disappear through merger and the remaining shops are likely to have their positions strengthened in dealings with clients.

TBWA itself is still on the acquisition trail, hoping to buy another medium-sized agency in order to realise its ambitions of becoming a top-15 agency.

"I am looking to buy |pounds~40m in billings, preferably in one agency but in two if necessary," said TBWA managing director Alastair Ritchie.

"Big clients care about size," he explained. "Critical mass puts you on their shopping lists and you won't be considered without it."

"Ritchie is not alone in his search for a merger," said Lorna Tilbian, media analyst at merchant bank SG Warburg, who admits to having spoken to many agencies recently about buying or being bought.

"There could be as many as 50 companies merging over the course of the next 12 months as the industry addresses its fundamental problems of oversupply and lack of growth."

Management consultant Coopers & Lybrand has been expecting an industry shake-out for two years. According to Suzanne Snowden, the manager of its media consultancy: "There isn't enough business and too many players. Agency margins fell during the recession, clients now have greater bargaining power, there are low barriers to entry and the industry is vulnerable to the threat of substitute services from below-the-line."

Her analysis is confirmed by Bill Husselby, chairman of independent agency Cogent. …

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