Farm Communications and Cello-owned Leith London announced a merger last week, with both advertising agencies stating the deal would allow them to achieve “critical mass”. They agreed that they were too small individually to make certain pitch lists and attract clients. The merger, which lifts the combined entity to around 30 people, has re-ignited industry debate about agency size in an increasingly congested market.
Farm, which counts the Evening Standard, COI Communications and Co-operative Bank’s online brand Smile as clients, has enjoyed a steady trickle of new business, such as Enjoy England and National Book Tokens. But some observers believe it has failed to capitalise on its launch seven years ago in a blaze of publicity. Monkey, the media planning specialist 50% owned by Farm, is buying back its shares to stay independent.
Earlier this year, Leith London lost its flagship &£7m Carling account to Beattie McGuinness Bungay and was forced to cut one in five staff (MW February 23). But Cello executives insist they want to retain a London creative agency – and that it must be bigger.
Chief executive Mark Scott admits: “Most of Cello’s units are 50 to 100 people, and Leith London is small. It needed to be bigger for everyone’s benefit.” Growth will now be organic, he adds.
Rob Smith, managing partner at Farm, will be part of the new agency’s eight-strong management team. He says: “Farm’s doing fine, but it is difficult to break through to the next level when you are a small, organic business. We needed to be part of something a bit bigger.”
He adds: “We’ve had conversations with clients over the past couple of months, and opportunities to pitch for bigger bits of business. The chemistry, culture and creativity have been attractive, but there was a concern that we don’t have the scale, size or resources.”
Indeed, one client pointed out that its marketing department alone had more staff than the agency.
Is big always beautiful?
Yet others question the need to be of a certain size. Ben Bilboul, managing partner of Karmarama, believes there is still a need for small, creative agencies even for clients the scale of Diageo, for example.
“There is a market for companies like ours which are small, nimble and independent. A large part of the client community is attracted to those things,” he says. “However, there are always certain types of clients attracted to agencies with a particular scale.”
Another agency executive calls the merger “a sign of distress”.
“I am not convinced by the argument that you can take two small agencies, make a medium-sized one and gain more gravitas,” he says. “It is an argument akin to saying ‘take two adolescents and get one adult’ – it simply does not work.”
But the merger is agreed, and attention is now turning to integrating the agencies – and which name will hang above the door.
Onlookers feel the Leith brand will be sacrificed in favour of Farm. One says: “Farm is strong and it would appear Cello is buying into that. You could say that Leith London takes away from its Scottish sister shop [The Leith Agency] and ask whether the strategy of one brand in two separate, regional offices is a great idea. It makes sense to have a new, separate brand in London.”
Whatever the name, the new team must quickly work on proving its theory that being slightly bigger is a lot better.