Good for Creston. Good for Tullo Marshall Warren?

Creston, the marketing services holding company that introduced itself to the wider advertising world last year when it bought Delaney Lund Knox Warren & Partners (DLKW), has added another high-profile string to its bow by purchasing the UK’s biggest independent direct marketing agency, Tullo Marshall Warren (TMW).

The deal sees Creston pay an initial &£19.3m for the agency with a mixture of cash and shares, plus a further &£19m depending on performance over the next three years. Creston, run by former Saatchi & Saatchi executive Don Elgie, has also bought research group ICM for up to &£37.2m, taking the number of companies in its stable to nine.

TMW was set up 19 years ago and its clients include British Airways, Diageo and Unilever. It is currently the ninth largest direct marketing agency in the UK by gross profit. Co-founder and business development director Richard Marshall says: “We’ll keep the entrepreneurial DNA and energy the company has used to grow. There has been a strong sentiment of congratulations among the entire agency staff and all our clients, several of whom have demanded a multi-service approach and a broader offering – the Creston deal allows that to happen.”

Following the acquisition of TMW and ICM, Creston has an annual turnover of &£120m and profits of &£14m. Elgie, who says he has been courting TMW since Creston’s inception in 2001, aims to increase profits to &£50m in five years, but thinks on current performance that can be achieved within three.

He has now set his sights on a media planning agency but does not want to get involved in media buying, because he sees it as a “commodity market full of bulk-buying, controlled by the largest operators”. Elgie is also looking for a search optimisation agency and an experiential marketing company and plans to buy agencies “with the right culture” in Europe, the US, Asia and South America.

Advertising makes up only 19% of Creston’s revenue and Elgie thinks it should never represent more than 25% of any marketing services group’s income. He claims the figure at WPP is 52%, adding: “That’s the main difference between us and the other big marketing services groups. We started in 2001 with a blank sheet of paper. If WPP could start again it would do things our way.”

Elgie says TMW will benefit from “cross-selling opportunities” that exist within the group, but one industry source points out that there would have been far more of these if the agency had been bought by the likes of WPP or Omnicom.

“It’s an excellent deal for TMW but I’m sceptical about client referrals within such a small entity as Creston,” says the source. “The only likely source of referrals is DLKW and that already has its own direct agency [DLKW Dialogue].”

Although TMW’s pricetag has the potential to be higher than DLKW’s &£38.2m, Jim Surguy, a senior partner at Results Business Consulting, thinks Creston has got a bargain. Surguy, who was involved in the sale of a majority stake in Miles Calcraft Briginshaw Duffy to Creston rival Cossette last year, as well as the DLKW deal, says: “TMW is a trophy asset and I thought it would have sold for a bit more. It got 6.3 times its profit before tax and that’s not so high for a company of that quality.”

Robert Lester and Mark Choueke

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