At the time, floating Young & Rubicam seemed a smart idea. Like most private companies, even profitable well-run ones, it wasn’t particularly cash rich. Yet a problem was looming and only extra cash could sort it out. A generation of senior executives, led by former chairman and chief executive Peter Georgescu, were planning their retirement, but Y&R couldn’t afford to pay them off. Then again, Y&R was getting nowhere in the corporate acquisitions game. Publicly-funded companies such as Omnicom, IPG and WPP could outbid Y&R at every turn. More than 70 years of proud independence were drawing to a close.
A flotation solved these problems at a stroke, while guaranteeing the independence of Y&R’s management. Grey, whose astute chief executive Ed Meyer has run a profitable, publicly-quoted company like a privately-owned fiefdom for several decades, seemed to provide the template. As it happens, Y&R wasn’t half as smart. Flotation provided no more than a stay of execution. Y&R is about to be enslaved: its only choice is the captor.
At the moment, the odds are on Publicis. What a prize Y&R would be for chief executive Maurice Levy. More than the quality and breadth of its businesses, Y&R offers the key to Publicis’ long-term survival. It represents the critical mass that the French network craves in the US and a ticket to the global league game. At roughly $5bn (&£3.1bn), Y&R looks a snip. Yet, despite Y&R chief executive Tom Bell’s blessing for the Publicis deal, serious issues need to be ironed out. One of them is Ford, which just happens to be Y&R’s core global client. In the recent past, several enlightened global advertisers have expressed a more lenient attitude towards competitive conflict within agency networks. Alas, Ford is not one of them. Any agency group which takes on Ford is obliged to sign a solemn undertaking that it will eschew competitive business. Such as, in this case, Publicis’ Renault, BMW (through Fallon McElligott) and General Motors’ (through Hal Riney) accounts. Is Ford about to change its mind? If it does not, the Y&R/Publicis deal is dead in the water.
A clue to Ford’s stance may be provided by the circumstances of the deal. Was it strictly necessary? To a marketing executive at Ford, indifferent to agency machinations, the choice of Publicis over WPP as a suitor must seem perverse, given that J Walter Thompson and Ogilvy & Mather – WPP’s main advertising networks – are Ford agencies.
Since there is little or no difference between the pricing or technical merits of both offers, the decision to recommend one party over the other must have lain elsewhere. That ‘elsewhere’ needs to be pretty convincing if Bell’s reputation is to remain intact. Unfortunately, the abstruse ‘terms of management control’ issue which is said to have balked agreement with WPP fails to convince. More likely, the breakdown resulted from a raw clash of egos.
Even if Ford is pacified, observers feel the Y&R/Publicis option will be a pis aller, conjured out of desperation. Certainly, it would be a better outcome for IPG and Omnicom than a WPP deal.