Is Creston condemned to repeat the mistakes of the past?
Creston, the UK-based owner of Delaney Lund Knox Warren (DLKW) and Tullo Marshall Warren (TMW), has hired former FCB global chief Steve Blamer to spearhead its expansion in the US (MW last week).
Group chief executive Don Elgie says he has made "no secret" of his plans, but despite its big-name hiring, the US will be difficult to crack/ history suggests a long, arduous struggle with potentially little return.
As KLP Group founder Colin Lloyd warns: "There is a direct correlation between the distance a subsidiary is from the element of control and the knowledge you have of that market."
Lloyd, an independent marketing communications director, launched KLP in 12 countries before selling to French advertising group RSCG in 1990.
Another common mistake is overpaying and overstretching resources, something that Ibis Capital director David Forster says happened to Saatchi & Saatchi when it paid $450m to buy Bates, the US advertising group, in 1984 — part of a spending spree by Saatchi, later Cordiant Group, that led to its collapse and sale to WPP.
Other holding companies adopting "buy and build" strategies gambled on the "good times" and took too many contingent liabilities on things such as earn-outs, says Forster.
Acquiring gravitas
Agencies such as Bartle Bogle Hegarty (BBH) in 1998, M&C Saatchi (1994) and Mother (2003) have taken a different approach by trading on their names and UK reputations in the US. Yet that approach is equally fraught with difficulty.
Simon Sherwood, group chief operating officer of BBH, says it takes 20 years to break through. "We’re on the map, but we haven’t yet burst through," he adds.
Sherwood says that although there are "thousands" of US agencies, the market is "not entrepreneurial". He claims it is difficult for small agencies to become established quickly. "It is very competitive and conservative," he adds.
This issue, says Elgie, is one reason why Creston is focusing on buying up existing agencies and why he does not foresee it opening US branches of its UK operations, such as DLKW or TMW. Having Blamer, the former FCB Worldwide chief executive and chairman, on board will give the operation gravitas and "unlock some doors", he adds.
"Elgie had to move out of the UK," says Blamer. "Obviously, the next logical place had to be the US because of the size and scale of the market." Blamer sees a gap for agencies wanting to make the next step up without private-equity funding or having to sell to a large holding company and then "sitting at the children’s table".
Disciplined approach
Others ask why an agency would sell to Creston instead of a larger holding group, particularly if there is limited scope to build their brand abroad. There are also questions about the spread of investment, although Elgie is confident existing businesses will continue to operate as before.
Forster believes Creston will avoid many of the pitfalls of its predecessors and praises Elgie’s "measured" and "disciplined" approach.
"He is tough. He has the benefit of hindsight and in the UK he has looked at the downsides as well as the upsides. I don’t think that now he will bet it all on black."
As Lloyd says, it is imperative that Creston looks to build abroad, and to do so it must gamble on the US. Launching there is a risk for Creston, but Elgie believes the odds are stacked in his favour.
