The resignation of two executives in an Italian company would barely raise an eyebrow in this country under normal circumstances.
But the news which has recently hit CIA Italy is creating ripples, and gives a big clue about events behind the scenes at the UK-based media company.
Two weeks ago, Giulio Malegori, former director of CIA company Blumedia, defected to the new Italian office of WPP’s MindShare. And it emerged last week that Italian chairman, founder and CIA lynchpin Marco Benatti has given notice, allowing him to quit at the end of his three-year contract which ends in December (MW January 21).
Previously, problems for CIA’ s parent company Tempus had been confined to the UK market. Its account losses – headed by the 110m BT business in July and the swathe of redundancies it was forced to make as a result – have been catalogued in painful detail.
But the outbreak of problems in Italy is significant, not only because it is an important market for Tempus. Analysts estimate it now brings in about 21 per cent of CIA’s billings, which, for the six months to 30 June 1998 were 838m. The country accounts for nearly 20 per cent of
Tempus’ annualised billings of 4bn. Reliable industry sources reckon its operating profit contribution to pretax profits of 12m-plus is over 3m and perhaps as much as 5m.
Benatti, the founder and partner of CIA in Italy, is a widely respected figure in the market. And Malegori was considered instrumental in securing key business, such as Kraft and Unilever.
But the picture is more vivid when you take into account the backdrop to these events – a bitter power-struggle between Tempus chairman Chris Ingram and WPP Group chief executive Martin Sorrell for the control of Tempus.
Sources speculate that Sorrell has been looking to increase his stake in the company for some time. It was Benatti who let Sorrell into CIA, when he sold him his 14.6 per cent stake in the agency 18 months ago. Sorrell has since increased his stake to 17.25 per cent.
Some have described WPP’s poaching of Malegori and the opening up of a MindShare office in one of CIA’s strongest markets, as a nifty piece of corporate muscle-flexing on WPP’s part. CIA felt a chill wind from Sorrell when its joint venture in Singapore with ad agency Batey ended, after WPP bought a 37 per cent stake in Batey over a year ago.
CIA’s culture of independence is a valuable commodity to a large marketing service such as WPP, which may find it difficult to graft the agency’s nimble and entrepreneurial culture onto the group’s more layered structure.
CIA is strong in some European markets and controls some key business which Sorrell would like to take control of.
Ironically, while CIA UK has lost out as a result of recent mergers between Lloyds TSB and Somerfield KwikSave, it is well placed to capitalise on future company mergers through its much-praised international department. Corporate mergers are likely to result in fewer but larger multi-country accounts. CIA’s international department is also looking to appoint two new board-level heavyweights. This department has had a number of wins in recent months, including the Novartis consumer Health business across Europe, the Middle East and Africa, plus Gap and CGU in the UK.
“Tempus group has had a storming final quarter,” says Paul Richards, media analyst at stockbroker Panmure Gordon. “We see it as a good value stock which is undervalued.”
Last week, Tempus’ share price shot up some 12 per cent on the back of news that profits are predicted to be higher than the expected 12m, which may partly be the result of cost efficiencies driven by a slimmer structure in the UK.
One former staff member believes that if the company is to achieve its aim of being among the top six global players in the next two years, it will need a partner. The kind of autonomy enjoyed by CIA is becoming a rarity as global agencies move in to buy the independents.
In the last annual report Ingram stated: “We have made no secret of our ambition to be a major global player by the year 2001, and we continue to be alert to opportunities in pursuit of this aim.”
But the question is whether CIA executives would link up with WPP, or look elsewhere. Privately, senior executives maintain that they would walk out if CIA were to be taken over by WPP. But observers suggest that if the price was right, some would stay.
An interim measure could be a loose, face-saving alliance structure in some markets which would be a precursor to something more. “I think that in the end they (CIA and WPP in Italy) will try to find synergies in some way, shape or form,” says a source close to CIA in Italy. “They might centralise resources and perhaps not pitch for the same pieces of new business.”
CIA has other irons in the fire. It has linked with True North’s Bozell Worldwide to pitch for the estimated 1bn DaimlerChrysler account. And it has not ruled out closer co-operation with Bozell and True North.
CIA will need to team up with someone if it is to achieve its stated ambition by 2001. Whether Martin Sorrell’s proposition is the only one on the table remains to be seen.