Saatchi & Saatchi has done a U-turn on its plans for a three-agency network by closing CME.KHBB Continental Europe’s offices.
Officially, the offices are to be merged with sister agency Bates Europe. But in effect it is the end of Saatchi’s two-year adventure in building a third international agency network through its Campbell Mithun Esty subsidiary.
The decision has been taken to stem losses being suffered by the European offices.
More than 20 people face redundancy unless positions can be found in Bates network – which forecast 150 redundancies last week, following its loss of the $300m (£200m) Mars account.
For Saatchi it is an embarrassing end to the enlarged network structure which was intended to strengthen its position in Europe.
It represents a fundamental change in strategic ap-proach, and follows spec- ulation about the future of Bates Worldwide within the group. Ayer offered $375m (£245m) for Bates before Christmas.
The European CME network was designed to handle US clients. The main work came from industrial group 3M, which is reviewing its worldwide advertising. CME was pitching against Bates and others for the task. Other clients included DHL, Pentax and Uniroyal – which came through London.
“The original business plan was built on the idea that a lot of US work would come via CME.KHBB Paris. The plan was fundamentally flawed and it miscalculated the influence the agency held over its US clients,” says one source.
Saatchi says CME.KHBB in London and CME in Minneapolis will remain as standalone agencies. However, the decision coincides with speculation in the US that the CME management in Minneapolis plans a buyout.
“It was decided that the development time and cost involved in taking the concept forward is longer and more expensive than previously imagined,” says Saatchi spokesman Tim Jackson.
“Within any group you have a set of priorities – we are investing in Zenith and other territories like China and Latin America,” he adds.
After opening the offices in Brussels, Frankfurt, Paris, Madrid and Milan in October 1992, Saatchi gave CME two years to become self-sufficient. It failed, and the parent has decided to pull the plug, with losses of about £5m.
“The group has invested, but the return on an independent network will take longer than anticipated, and so the company has decided that it should merge the two agencies,” says CME.KHBB Continental Europe chief executive Judy Balint. “I think it would have taken another three years to make it totally independent.”