Ad agency-PR mergers, as in a marriage, need mutual interests and 'time to think.' (Braun & Co. merger with Ketchum Communications)

Ad agency-PR mergers, as in a marriage, need mutual interests and `time to think'

It's said most mergers don't work out, resulting in grin-and-bear-it existences or nasty divorces, a warning that made officials of Los Angeles-based Braun & Co. public relations agency here leery when suitors came courting, especially eastern ad agencies on the prowl.

So you just know what happened. Braun was acquired by an eastern-based ad agency. Ketchum Communications of Pittsburgh. The wedding occurred last January. But it wasn't a love-at-first-sight, flash mating. The Brauns had no particular feud with the Ketchums; it was just that they didn't want to be merger-friendly with anyone. They were quite happy being single, thank you.

Since mergers are a trend in the agency business, especially ad agencies picking up PR agencies, Braun had been a hard-to-get target for years, and for years had heroically resisted.

"Most major firms came to see us about it, and we'd listen politely but only briefly," says Larry Fisher, president of Braun (which remains Braun, post-merger). "That was our first response to Ketchum when they made a run at us early in 1988. But they wouldn't go away."

Marriage didn't seem to make sense. Ketchum was a big ad agency (billings: $850 million) with a PR arm and a heavy weighting of food industry clients and Braun was a relatively small (PR billings: some $3.5 million) agency specializing in financial and government relations for companies and organizations primarily on the West Coast.

A digression, about Ketchum: When it began to romance Braun, it was on a fast lane to acquisitions, having soaked up seven shops since its binge began in mid-1987. So it seemed indeed a wolf on the prowl, appearing to tuck acquired agencies away liked a swelling and forgotten portfolio of investments.

Yet that wasn't really true. Ketchum was known as an agency that respected independence. It was in fact called the porcupine agency, stemming from an ad campaign it generated for itself picturing a porcupine, quills extended, and declaring Ketchum untouchable amid the fierce merger wave among agencies, a strong assertion of independence.

The porcupine persisted in its proposal for independent Braun. "They kept coming back, taking us to the very finest of restaurants," Fisher recalls. "Before too very long, it began to make sense."

Ketchum-Braun might well serve as a model for mergers, and the analogy to marriage is appropriate. In marriages and mergers, the parties often seem to forget basics. To make it together, you must be compatible, have similar goals and interests, plus mutual respect. Only then should you discuss terms, which in both cases might wisely contain a pre-nuptial agreement. And, of prime importance, don't rush into it, or succumb to a hostile offer (or to a white knight, for that matter). And try to remember that in marriage the two partners are separate individuals.

In Ketchum-Braun, independence was a key. Ketchum, the proposer, was one of the nation's few remaining large ad agencies that was employee owned. Its 177 shareholders all were employees. Braun also was employee-owned.

A high degree of independence for each could be maintained. "We had seen too many agencies disappear into far-larger organizations, never to be heard of again," says Fisher.

In marriages and mergers, opposites attract. "They were quite different from us, with accounts in food and health care, so it became apparent we could contribute to them, helping with investor relations and public affairs, and they could obviously contribute to us."

"They had researched us quite well," Fisher notes. "They knew the type and quality of our people. And they were able to show us that we could paint on a much larger canvas. It was an opportunity to move into a national scope."

Two matters should be noted. One: The merger has not been in effect long enough to assure its complete success (Braun has a buy-back agreement if disillusionment sets in). Two: Braun's capitulation was somewhat colored by the fact to really count in agency PR you must be national, even international. This is true of ad agencies as well: half the big U.S. ones are foreign-owned, primarily by the British, due to generous tax laws on foreign investment.

"With this consolidation going on, we didn't want to become a part of a giant foreign organization," says Fisher. "At the same time, we had ambitions to expand."

Yet 40-employee Braun, despite its strengths, is but a pebble within Ketchum. Its $3.5 million billings (about 18 percent comes down to profits) compares with 400-employee Ketchum PR's $40 million. However, combined PR billings will make as much of a contribution to profits as the $850 million ad billings, Fisher believes.

Braun & Co. was formed by Ted Braun in the early 1930s, under a form of patronage from Charles Merrill of the then Merrill Lynch, Pierce, Fenner & Beane. (Merrill and Lynch, despite the lack of a separating comma in the brokerage firm's name, were two people.) One of Braun's deeds in California was breaking down, via voter initiative, of tax advantages for mom-and-pop grocery stores that held outlets to three, paving the way for the Safeway chain.

And, on the subject of wedding PR and advertising, the 20th booklet produced by the 4-A's for ad agency account executives is titled, "What every Account Executive Should Know About Public Relations." It doesn't try to bypass the age-old question: What is PR? Quote: "As long as public relations has been around -- and there's an old joke that Aaron was Moses' press secretary -- there has been no agreement on a precise definition."

Miscellany

Glasnost: Alba marketing plots to place Russian, Polish and Hungarian coins in Super Golden Crisp cereal, a Kraft product ...They earn it: Foote, Cone & Belding earns $19.6 million in '89, up 49 percent; billings hit $4.3 billion, seventh worldwide...Ad acronyms: Group 243 Inc., forecasting faster fast food and more self service, invents SALTs (Single People with Limited Time), MALTs (Married People, Limited Time), HALTs (Harried Adults, Limited Time) for the '90s, dubbed "Decade of Compression," DOC?

Accounts

Power play: Saatchi & Saatchi DFS/Pacific gets $2 million Yamaha Outdoor Power Equipment account...CalBiz: Blaze Co. is retained to handle 25th anniversary of California Business magazine...Touche: Lippin Group is hired to assist PR-marketing for entry of Deloitte & Touche, the accountancy firm, into serving the entertainment industry here...Medical: Ruder Finn of California is retained to handle PR for Sansum Medical Clinic in Santa Barbara and the California School of Professional Psychology.

People

AE's: New account executives at Eisaman, Johns & Law: Charlene Yu (Domino's Pizza), Mary Love Stupinski (Giorgio), Elizabeth Peay (Neutrogena)...Veepee: David Ellis is promoted to vice president at Rogers & Associates PR.

Arelo Sederberg covers advertising, public relations and media in Los Angeles County.