Going to market back in fashion?
The imminent merger of listed marketing services group Incepta and leading City PR company Citigate is interesting in more ways than one.
To begin with, it’s probably the largest acquisition in the sector for some time and certainly one of the more important. Observers of the scene will wonder whether it signals a trend. Could it be we are about to re-experience the heady days of the mid-Eighties, when practically any marketing services consultancy could foist itself on the market with a fancy multiple? The burnt-out wrecks still around us should caution against such recklessness. But greed has a very short memory and the general economy is performing well.
Nonetheless, the current deal suggests it is more carefully thought out than most. Incepta, which is run by sales promotion guru Graham Green, has had a rough ride in the past. In its former incarnation as WMGO Group, it was in that worst combination of circumstances: undercapitalised, running at a loss and a prey to angry public shareholders. Green has trimmed a lot of the deadwood and turned the company round in little over a year, but critical mass and ultimate respectability is only possible through corporate acquisition.
Citigate, on the other hand, has experienced formidable, uninterrupted growth since its formation in 1988. It now boasts 350 staff and a geographical presence in the UK, US, Hong Kong and South Africa. But it is privately owned and badly needs a stock market listing to fulfill its potential. Only public money will help Citigate to buy, for example, a serious presence in North America.
Technically, the deal is a takeover of Citigate, which is the larger company. But the terms put top Citigate management in an advantageous position within the enlarged company. Incepta shareholders are unlikely to be disturbed by this, as the deal will enhance their earnings. The key issue over the longer term, as with all people businesses, will be personal chemistry between the management of the two sides.
Green believes the details of the reporting structure are less important than the synergy between the two businesses. He sees advantage in the fact that corporate PR practitioners play an increasingly respectable role as advisors in the client boardroom, a trend which could benefit business development in other areas.
Inevitably the Citigate deal will invite comparison with those other quoted PR groups, Shandwick and Lowe Bell – neither of which has done much with its listing recently. It remains to be seen if aggressive international expansion is the best way forward for PR companies. But Citigate’s future performance should give us some further insight.
News, page 5
