Fireworks and fallout: the great agency merger

When two creative cultures collide, there are almost always fireworks and fallout. So how can merging agencies overcome their differences to bridge the culture gap?

Ill-conceived marriages. Overbearing in-laws. Doomed relationships with spoilt and moody stepchildren. Forced moves into cramped and awkwardly located new homes.

No, this is not a Campaign agony column but a list of analogies used to describe the bête noire of the creative industry…

Like a billboard pasted across industry stalwarts’ memories, the list of failed agency mergers is writ large: see HHCL and Red Cell, Lowe and Lintas, MCBD and Dare… all examples of agencies whose commendable assortment of talents looked good on paper, but did not mix.

Yet, uncomfortable as they may be, mergers are set to be a regular fixture for years to come: the UK is not only widely viewed as an "innovation hub", it’s also the most popular market for agency buyers, with 82% of them looking to shop here, according to the second annual Global Acquirer Report. Buyers, drawn to the "entrepreneurial talent" and "international outlook" of UK agencies, are keen to gain access to skills and talent (70%), as well as emerging technologies (66%). Moreover, in an overserved market many mergers are borne of necessity, such as VMLY&R and Wunderman Thompson, as holding companies look to rationalise their brands and cut back-office costs.

So, while global networks, private equity firms and management consultancies storm the agency landscape like children on the rampage in a sweet factory, looking for the shiniest, sweetest additions to their baskets, agencies must ready themselves for the pick, and the subsequent mix, into a new and different agency culture.

Tristan Rice, a partner at M&A advisory business SI Partners, says that despite these being predominantly people businesses, buyers generally under-invest in merging cultures: "It’s odd that there’s a due diligence process which usually takes two to three months, and it’s entirely based around legal, tax and financial matters. But there’s very little due diligence done on culture and how the envisions of the businesses are going to work together."

Ultimately, he says, it’s because most mergers are shrouded in secrecy until the deal is signed, sealed and delivered, with little known to the people who could get involved in preparing to merge cultures. Still, it’s best to bring a few trusted people into the fold and, instead of eyeing the buyer with suspicion, get issues hammered out on the table early on, because "culture and cultural integration is the fuel of deal synergies. It is the reason for doing the deal, the logic of: if we put this with this, we can do this together," Rice says.

According to Adrian Walcott, managing director at Brands with Values, the most subversive factor in merger and acquisition activity is culture clash, which he agrees is not often considered before the deal. "And then we see that people start to leave, productivity goes down, morale goes down, and actually this thing that they signed up to, the holy grail, just goes further and further away," Walcott says. At this point, he believes, the metrics available, such as engagement surveys, do little in terms of understanding cultural shifts and how people are really feeling.

"The basic questions around leadership, inclusion, wellness programmes… all the rest of it; they don’t really get to the crux of what drives the people that have been impacted. What are their personal values? What do they get out of bed for? What do they currently see in the organisations they’re in?"

What employees see happening post-merger, and particularly the behaviour exhibited by new leadership, is key, Walcott believes. The biggest issue is hypocrisy in leadership and the way it operates. And if leaders’ behaviour doesn’t live up to the policies and programmes that have been communicated, it’s "the biggest derailer because you lose the trust of your employees", Walcott says.

Release creative energy

So, how do agency cultures merge, and can it ever be a success? One industry observer said starkly: "Mergers don’t work." Others were also sceptical, telling horror stories of confusion, clashes, demoralisation of staff, duplication of work and, ultimately, the loss of clients. The infamous MCBD/Dare merger of 2011, "where everyone was terribly polite and democratic", is particularly telling. The merged agency ended up with two chief executives, two creative directors, a lot of job sharing and too little clear leadership. And the culture of Cossette, Dare’s Canadian holding company, was simply too "nice". "If they had been American or French, the management team probably would have been told to just get on with it", one observer said.

Yet, there’s proof that it’s possible to engineer a successful merger. James Murphy, for example, has lived through two agency marriages, both considered happy and healthy. First, Rainey Kelly Campbell Roalfe with Y&R in 1999 and later Adam & Eve to DDB in 2012. In both cases, large UK operations of global networks, Y&R and DDB respectively, were flagging operations. "They effectively needed a blood transfusion, so in each case they bought a small independent agency to provide new leadership, energy and direction," Murphy explains.

'The M&C Saatchi team have reputationally been a bit more feisty and outgoing in their nature, whereas Lida people have a reputation for being warmer and more considerate of other people'
— Camilla Kemp

These were successful mergers because Y&R and DDB were unambiguously frank about the reasons for the merger, using it as an opportunity to present a solution, "because this business has been in trouble, and it needs to raise its game considerably", and senior leadership positions were taken up by people from the small incoming agency.

One of the challenges, Murphy says, is that agency cultures can trade on past glories, while the market around them changes, but the "dramatic and traumatic" merger option is one of the best ways of dealing with a stalling agency, he believes, with both RKCR/Y&R and Adam & Eve/DDB coming out of it as stronger agencies. With DDB, Murphy says, "we dismantled departments, we took away hierarchies and got rid of whole tranches of the traffic system and the complex briefing system they’d had. We simplified huge amounts of things, so effectively making it very clear, verbally, what we were after, but then making it almost physically present in an organisation by dismantling the things that were blocking the energy."

And while the merger led to an exodus of senior management in the parent company, the body of colleagues remained strong, leaving great numbers of talented middle management and younger people, who were provided with a release. "They’d been stuck, so what we were trying to remedy was a situation where a lot of talent and energy was stymied by politics, hierarchy and egos. And once those went, there was this huge outburst of creative and intellectual energy," Murphy says.

Let synergies shine through

This "reverse takeover" situation is a common adland scenario, but equally common is the merger where two different sets of expertise are being brought together. In this situation, says Martin Jones, managing partner at AAR, agencies are usually looking to take facets from both brands to create a new joint brand culture. 

"This takes more planning and specialist involvement – and to succeed, workshops, alignment sessions and cascading to teams is required. This can be a successful and hugely engaging process, but be ready to invest time and energy," Jones warns. "It’s vital to get the housekeeping right as quickly as possible – things like streamlining email sign-offs, websites and other comms, but also getting people using ‘we’ in meetings and not ‘they’, and always referring to the agency by its new name."

Currently underway and just a few weeks into the early stages of this kind of merger is Camilla Kemp, freshly anointed chief executive of M&C Saatchi, who is charged with enmeshing M&C Saatchi with stablemate CRM specialist Lida. Previously operating as separate businesses, the two have been brought together to create an integrated offering following a widely reported series of accounting errors thought to stem from M&C Saatchi’s historic acquisition of smaller agencies. While there are already some shared philosophies and principles, with cross-company initiatives such as its Parents Network, co-chaired by Kemp, and the Together network, which is about supporting mental health, these existing synergies make a healthy incubation tank for an agency pairing, but not an end result.

Murphy: 'They effectively needed a blood transfusion, so in each case they bought a small independent agency to provide new leadership, energy and direction'

"They each have a different spirit," Kemp says, "from practical ways of working, through to attitudinally. The M&C Saatchi team have reputationally been a bit more feisty and outgoing in their nature, whereas Lida people have a reputation for being warmer and more considerate of other people – and rightly or wrongly, those are the personality traits that have shone through."

Kemp and Ben Golik, Lida’s chief creative officer, established early on that they did not want to "go into a room to write down words about how the culture was going to be and stick them on a wall and everyone is going to behave in the following way… because that’s just weird".

Instead, she says, they decided to listen. Six working groups covering people, process, product, profit, profile and proposition have been set up, and each of those groups includes a person from Lida and a person from M&C Saatchi, whose job over the past few weeks has been to go and speak to everybody else and get their opinion in order to shape a new process. "And then we can say: let’s take the best of this company and the best of this one – and, by the way, let’s get rid of some stuff we don’t want to do, and then work out our ideal new process we’re going to create together. Culture is at the heart of all of those things."

Articulate the culture

But there are some who would rather go into the exercise with a prescribed set of values and beliefs, according to Dan Gilbert, chief executive at Brainlabs, a performance marketing agency that is quickly acquiring smaller agencies such as Distilled, and has gone from a staff of one to 350 in the past two years. Gilbert has brought in Suki Thompson, founder of Oystercatchers and Let’s Reset, to run workshops to help merge the agencies’ cultures.

"Mergers aside, our culture has changed and will always change," Gilbert says. "Popular narrative says culture is something that springs up from the masses and happens organically. But I believe quite the opposite; it can be aspirational so you can write down what you want it to be, and then behaviours can follow from there." Gilbert says he is taking a "calculated and deliberate" approach.

But does this suit the ad agency way of working? Thompson believes that agencies nowadays may have a very collaborative approach, but can still benefit from pinning down their values. "We like listening to each other, we don’t like being didactic. You’re trying to bring people on the journey, but the challenge is that we don’t really articulate what the future culture is. When are you going to say yes to pitches and when are you not? When are you going to insist that people work late at night or over the weekend? And what are you going to give back to make that OK?" Culturally involving programmes within agencies, such as charity or resilience initiatives, help to bring people together and get them talking to each other, she says.

'Just because you’ve always had a rule that says no pets, let’s change that rule because it’s irrelevant'
— Mat Goff

Regular communication and transparency are proving key at M&C Saatchi, explains Kemp, who says opportunities such as "lunch and learns", where case studies are being presented by both agencies, along with social gatherings and the more formal "town hall"-type events, allow teams to see chances for collaboration in their work. Kemp and Golik are also holding regular open drop-in sessions on Fridays to allow any colleagues from any department and level to ask anything about the newly merged agency. So far, questions have run from "how am I going to raise POs in the finance system?" to "who is my new line manager going to be?" and "what is the composition of the new company?"

"Yes, you need to have a vision that everyone buys into, but what I’m learning is that these kinds of questions make up the very familiar, very tangible experiences of coming to work each day, so we need to be careful that we don’t sweep aside those really important rituals and routines of the organisation, because those actually make up the feeling of the place," Kemp says.

It’s been a similar story at Wunderman Thompson, where chief executive Pip Hulbert has been merging the two WPP agencies to create a business of more than 650 people over the past 18 months: "It’s all about communication. We are people businesses and success comes from how we work together as individuals to create great work."

With digital specialist Wunderman and creative behemoth JWT coming together, there were instant opportunities for clients to benefit from the merger, which is something Hulbert maximised immediately. It was possible to do this from day one, she explains, because of the agencies’ size and scale. "We made a clear effort to ensure that people were mixed. So now we’ve got lots of different skillsets working across different clients, and every single client team has Wunderman Thompson mixed in together, which was our aim at the beginning of last year – something we have now achieved."

The mixing of teams is a work in progress within the nascent M&C Saatchi/Lida merger, and one that Kemp says will happen organically. "Clients might see that people come to the table with a view that is possibly a little bit more mature and rounded, but we’re not keen to make our clients feel bombarded by being cross-sold stuff they don’t want. As and when the opportunity arises – and it has already naturally – then we’re able to offer them the full solution." She adds that some teams "have already cross-fertilised where there’s a gap and a need". And Kemp points out that over time, all employees will have the chance to work on integrated client accounts, which will in turn contribute to the gelling together of the two agencies.

Golik and Kemp: overseeing the conscious coupling of M&C Saatchi and Lida

Location, location, location

A common thread running through merging and integrating cultures is the physical environment, with the general thinking being that if merging agencies can be housed in the same building, they will learn to collaborate more quickly. While the 225-strong M&C Saatchi and Lida will be occupying especially refurbished office space in the Golden Square building by the time you read this, Wunderman Thompson had to wait around eight months before they could unite.

Elsewhere in WPP, the UK arms of digital agencies Mirum and Possible were merged in April last year with the newly formed agency, Mirum UK, having co-located to Fitzrovia in June. The months in between were tough, says chief executive Chris Daplyn, who was travelling between the previous Mirum office in Knightsbridge and the previous Possible office in Hatton Garden in the meantime. But relocation has meant the two agencies have been more encouraged to integrate, Daplyn says. "We can’t underestimate the power of that. I think it would have been a different story if it had been one agency welcoming the other into their existing space. It really helped to underline the fact that it’s a new agency – we’re creating something new. And it helped to get people over that mental barrier."

However, when the Adam & Eve team took to the DDB offices back in 2011, the opposite was true: they moved in lock, stock and barrel, infiltrating the agency offices with the aim of delivering energy and new ways of working. They even brought their office dog, a fond memory for joint chief executives Tammy Einav and Mat Goff. But Freddie the French bulldog was not simply the agency mascot: he was also emblematic of the change in culture. "Just because you’ve always had a rule that says no pets, let’s change that rule because it’s irrelevant," Goff says. "And whatever the rules were, they’ve been preventing you from moving faster or getting together and having good ideas and getting them in front of your clients."

While agencies should be mindful of employees’ needs and sensitivities, it’s important to remember that the client is the reason for the business, says Goff, who warns the internal structure of the agency is only a means to an end for the client. There’s no need to waste too much time thinking about how to convince them, when "all they really want are good people who care about their problems and are passionate about their business". Because, after all, clients only want the shiniest, sweetest agencies too.

6 ways to make a merger work

1 Get on the bus

"In the case of a takeover, the dominant brand needs to codify what makes it great and stick firmly to this as a management team. Drive it through all decisions like a bus. It’s quite brutal for those aligned to the other brand but it’s clear and directional. Unless you are on this culture bus, no matter how talented you are, you need to get off."
Martin Jones, managing partner, AAR

2 Tell it like it is

"Regular communication, and transparency, has been very well-received in terms of how we communicate to the agency. We have made clear what our proposition is and what our mission is."
Pip Hulbert, chief executive, Wunderman Thompson

3 Open up

"We created areas of the building where people could come together to work on projects, chat and share ideas, to encourage collaborative ways of working and get ideas to flow much faster, which contributed to the whole culture of the place."
Tammy Einav, joint chief executive, Adam & Eve/DDB

4 Prepare to pivot

"There’s a temptation to think: we’ve issued our new contracts, we’ve got a new creds deck, we’ve done it. I’m expecting the process of bringing the businesses together to be one that continues – this will be an ongoing process over the next 12 months at least. We need to have the courage to try new approaches and, if they’re not working, then try something else."
Camilla Kemp, chief executive, M&C Saatchi

5 Remember the client

"The risk with a merger is that you can get side-tracked by thinking and worrying about yourselves when actually our clients have got problems and challenges and we need to keep moving forward, putting our best people on the case."
Mat Goff, joint chief executive, Adam & Eve/DDB

6 Maintain momentum

"Rather than starting something and letting it disappear, keep going. It’s easy for leadership teams to say: ‘Right, we’ve got it; we know where we’re going.’ But if the rest of the agency doesn’t get it, then it starts to fall apart, loads of people begin to leave because no-one has really articulated where they’re trying to go and how to get there. You want to get cultural change to be really sticky."
Suki Thompson, founder, Oystercatchers and Let’s Reset

Culture under the spotlight

Honesty, success and independence are the shared cultural aspirations of creative industry staff at all levels, according to the Creative Industries Culture Index. Devised by consultancy Brands with Values with the aim of exploring the desires, observations and motivations of agency staff and marketers, the survey was run in partnership with Oystercatchers and Campaign.

The index was based on the principles of Brands with Values’ Culture Decoder, a diagnostic tool designed to improve commercial performance by putting an organisation’s culture under the microscope. This has been deployed across a range of sectors covering tens of thousands of UK employees enabling researchers to create a benchmark for a healthy workplace culture. The benchmark score for a healthy culture was calculated as 20% or less; anything above was deemed unhealthy.

In the creative industries, agency and in-house professionals gained a "health score" of 19%. Yet, when the two were separated, the agencies scored 15% while brand-side marketers’ culture rating was an unhealthy 32%, with siloed working, hierarchy, short-term focus and bureaucracy identified as culprits.

Overall, the results reveal an industry with shared values across all levels of seniority. Honesty, success and independence were the most popular desired values expressed by respondents. This was in contrast to other industries, where the values of senior management contrasted sharply with those of more junior staff. Adrian Walcott, director of Brands with Values, said: "Regardless of orientation or seniority, creative industry folks are connected by shared values."

But filtering the data across ethnicity and gender exposed different pictures. 

Respondents identifying as African/Caribbean/Black British and Mixed/Multiple ethnic groups rated their work culture as unhealthy (23% and 25%) compared with Asian groups at 17% and White/Caucasian at 18%. In terms of gender, men enjoyed a culture health score of 15% while women came in at 21%, suggesting that women have a less positive experience at work than male counterparts.

At agencies, account management was the healthiest department at 15%. Creatives were bang on the benchmark at 20% but planning and marketing were above (21% and 26%).

The survey probed respondents on their personal values, the values they desire for their workplace and the values they actually observed at work. The more the personal and desired values of respondents were reflected in what they see at work, the healthier the work culture. The data shows that the industry wants its personal values reflected in its work with "creativity", "teamwork" and "being human" threading through personal and desired values. And despite being a popular desired value, "selflessness" (covering sentiments such as equality and purpose) was observed less in the workplace, highlighting a greater need for equality and social responsibility. Indeed, social responsibility was named as the number one concern for junior staff, while chief executives and directors put this sentiment in sixth place.

Email grow@brandswithvalues.com to receive the report

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