Revealed: Adam & Eve/DDB’s new share structure gives management a slice of profits

Omnicom agency issues 'B' shares in rare move.

An image of Adam & Eve/DDB's offices with a text explanation of an MEP overlaid
Adam & Eve/DDB: new share structure gives senior management profit share

Omnicom’s DDB has taken the unusual step of creating a dual share structure at Adam & Eve/DDB that gives the management of Britain’s biggest advertising agency a slice of annual profits, Campaign can reveal.

The US parent company has retained control of DDB UK, the operating company for Adam & Eve/DDB, after converting its shareholding into “A” shares and has allowed DDB UK to issue new “B” shares to an undisclosed number of Adam & Eve/DDB’s top team.

Under the terms of what the company calls a “management equity plan” (MEP), the owners of “B” shares are entitled to a percentage of the “distributable profits” of both the UK operation, known as Adam & Eve/DDB Group UK, and of its US offshoot, known as Adam & Eve/DDB Group North America.

There are also “call” and “put” options that allow the “B” shareholders to sell their shares back to DDB UK – an arrangement that suggests the “B” shares carry significant value.

Details have emerged in a series of recent Companies House filings, which show that DDB UK holds 1568 “A” shares and the management team have been given 32 “B” shares, which equates to 2% of the equity.

DDB UK has the right to issue more “B” shares in future and it has capped any potential payout to “B” shareholders at a maximum of 20% of distributable profits.

Adam & Eve/DDB’s management team have been in charge since the agency’s four founders departed – after receiving an estimated £110m when their earn-out completed in 2017 – and Omnicom’s decision to create the new share structure is likely to reflect the importance of retaining and incentivising the current top team.

Omnicom and Adam & Eve/DDB declined to comment when approached by Campaign.

A share of 2021 profits

The filings do not identify any of the management team or the size of any individual’s “B” shareholding. However, Adam & Eve/DDB said in its Campaign School Report last year that its three most senior figures were Tammy Einav, the chief executive of Adam & Eve/DDB Group UK, Mat Goff, the chief executive of Adam & Eve/DDB Group North America, and Rick Brim, the chief creative officer.

The fourth most senior executive was Alex Hesz, the global chief strategy officer, who quit in December to join Dentsu International, which is headed by Wendy Clark, the former global chief executive of DDB.

It is thought that discussions about creating the new Adam & Eve/DDB share structure have taken many months and were not sparked by fears that other members of the management team might quit.

The new management equity plan has taken effect from 1 January and the agency’s bosses will be entitled to take a percentage of profits for the most recent financial year ending December 2021, the filings show.

In its most recent accounts for 2020, DDB UK reported profit after tax of just under £10m on turnover of £84m, during the worst of the pandemic. Hypothetically, 2% of that profit would have equated to about £200,000 – a relatively modest sum if it were shared by a number of the management team.

Observers suggested it is likely that the agency’s bosses will continue to receive much of their compensation through salary and bonuses. The unnamed highest-paid director earned £992,000 in 2020, according to the accounts at Companies House.

“Fairly unprecedented”

Adam & Eve was founded in 2008, before selling to DDB in 2012, and became one of UK advertising’s biggest success stories through its Christmas ads for John Lewis & Partners, winning Agency of the Year at Cannes Lions in 2014 and 2018 and being named Agency of the Decade by Campaign in 2019.

The founders, James Murphy, David Golding, Ben Priest and Jon Forsyth, did not hold “B” shares after selling to DDB, previous company filings show, and collected the lion’s share of the earn-out in 2017.

Einav and Goff, who were two of the earliest employees of Adam & Eve, went on to take charge as joint chief executives of the agency, which is based in Paddington in west London, in December 2016. 

They have continued to grow the business as Adam & Eve/DDB overtook sister Omnicom shop Abbott Mead Vickers BBDO to become Britain’s biggest advertising agency by billings in 2019, according to Nielsen figures in Campaign’s 2020 School Reports.

The creation of the new share structure has come at the same time as management changes that have seen Einav become sole CEO of the UK agency and Goff leave the UK board to be CEO of the US operation.

One industry observer said it was “fairly unprecedented” for a global agency holding company to let a wholly-owned subsidiary give even a small percentage of equity to an agency’s management team – as opposed to awarding them stock in the ultimate parent company.

A second observer suggested the decision to issue “B” shares was so significant that it was likely to have required approval at the highest level of Omnicom in New York. “The current management team are disproportionately important to Adam & Eve/DDB – if they were to go, there’d be a bit of a client exodus,” this person said.

The observers added the move could have ramifications for the wider sector because it could prompt agency leaders at other holding company subsidiaries to push for an equity stake in their companies.

The management team of M&C Saatchi’s London ad agency has had an equity stake since 2016.

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