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M&C Saatchi

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The second agency founded by what are still the world's most famous admen, M&C Saatchi has built up a strong position for itself since formation in 1995, after Maurice and Charles Saatchi were ousted from their first agency Saatchi & Saatchi in a bitter boardroom row. Since then, M&C has risen to become one of the UK's foremost agencies, overtaking the original Saatchi business in domestic billings, and gradually establishing a global network which now stretches across 25 countries. Much of this expansion has been achieved organically or through local partnerships. The group has a particularly strong presence in the Asia Pacific region, considerably less so in the Americas. However, the performance of individual agencies has often been stormy. The Australian office has been rocked since 2012 by a succession of big losses and big gains. More serious still was the loss of M&C's two biggest UK accounts in quick succession in early 2014, followed by an ill-conceived overhaul of local management.

Competitors

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Clients

Click here for a M&C Saatchi client listing from Adbrands Account Assignments

Brands & Activities

M&C Saatchi promises marketing built on the principle of "brutal simplicity". "The strongest brands are the simplest," claims the agency's self-promotional literature. "The most valuable can be described in one word. We provide our clients with the global ownership of one word. One word equity requires Brutal Simplicity of Thought. Once we have found and tested the word, we spread the word. Across borders and disciplines."

The group has built up a reputation as a multi-hub creative network, and it is generally considered a force to be reckoned with in the UK and Asia. However its reputation was dented by the loss of the global British Airways account in 2005 - the agency had been widely tipped to keep the business, which had been its flagship account since inception. It has so far struggled to find any similar such major international account, so each of the individual agencies within its network relies upon their own separate local client rosters.

Some international outposts are less impressive than they could be, not least the US, where the loss of the British Airways account effectively put paid to a presence in New York. After that, the US advertising business operated mainly out of Los Angeles. However in 2014 the group aligned itself with New York independent SS&K, acquiring a 33% stake in that business with an option to take control after 2016. The stake had risen to 67% by mid 2017. The agency was founded in 1993 as Shepardson Stern & Kaminsky. Part of the holding acquired by M&C was previously owned by Creative Artists Agency, which was a minority partner of SS&K from 1999 to 2014.

M&C Saatchi Australia has also had something of a rollercoaster ride in the past couple of years, with a succession of huge account gains countered by equally substantial losses.

Perhaps the biggest decline has been at the group's original core agency in the UK. Here, M&C Saatchi rose inexorably into the top ranks of local agencies during the 2000s, peaking in 2007 as the local #3. Since then, though, performance has declined dramatically. Nielsen (in Campaign) estimated billings of £188m in 2013, placing M&C Saatchi as the country's #10 agency, its lowest ranking since the later 1990s. Worse still, it lost its two biggest clients - Dixons Retail and Direct Line - at the beginning of 2014. Adding insult to injury, the latter account shifted to Saatchi & Saatchi. That caused Nielsen's estimate for 2014 to plunge by a third to £126m.

In an attempt to arrest the decline, the group executed what was to prove an ill-advised reverse takeover of the main London agency by newly acquired digital shop Lean Mean Fighting Machine in 2014. The idea was that the latter's management would shake-up the stuffy thinking that appeared to have taken over the main agency. Following the abrupt departure of M&C London chief executive Camilla Harrisson, LMFM's co-founder Tom Bazeley was appointed as head of the merged agency. Yet the appointment not only failed reinvigorate the business but also failed to halt the departure of important accounts. In 2015, M&C slipped out of the Top 20 agencies for the first time, with estimated billings falling to £87m. In another attempt to build self-confidence, the group sold a 30% shareholding in M&C London to its new senior management team. Yet for that year, the agency slipped to #24 in the rankings, with billings of £63m.

Of M&C UK's other accounts, RBS is by far the biggest, encompassing both NatWest and Royal Bank of Scotland. As befits a collection of what are generally mass-market, often retail-oriented accounts, M&C Saatchi London's creative output tends to be workmanlike rather than cutting edge, although it can also produce more interesting work when required. (A cheeky campaign for Curry's and PC World stablemate Dixons, lampooning other stores' marketing, was especially noteworthy in 2009). Another cornerstone client, Transport For London, was Campaign's Advertiser of the Year in 2008. Yet it departed the agency in 2016.

In addition to the main advertising agency, the group operates what used to be called the M&C Saatchi Village, a network of satellites offering more diversified services such as PR, direct marketing, new media and so on. The most significant of these was for several years media shop Walker Media, originally a joint venture with Christine Walker, former head of Zenith Media, but wholly owned by M&C Saatchi since 2007. It was ranked by Nielsen (in Campaign) as the #10 media agency in the UK in 2012, with billings estimated at £239m. That figure was down sharply on the year before as a result of the loss of major client Barclays. In 2013, M&C sold a 75.1% stake in Walker to the struggling UK arm of ZenithOptimedia. (It continued to own the remaining 24.9% of equity until Jan 2019, when the shares were bought out by Publicis for £25m). Walker relaunched in Mar 2015 as Blue 449. Though Walker/Blue 449 now has minimal overlap with the main UK operation, it generates a significant profit contribution: £1.3m in 2016.

Another key subsidiary is direct and digital marketing agency Lida, named as Campaign's Direct Marketing Agency of the Year for 2013 and 2014. Lida UK LLP reported gross profit of £20.4m in 2016, and net profit of £4.2m. Its top three clients, presumably O2, Boots and Ikea, between them account for more than half of revenues. A US office of Lida opened in 2016 following the acquisition by the group of a majority stake in local CRM agency MCD Partners.

There are two PR agencies under the group umbrella, fashion specialist Talk PR and more widely based M&C Saatchi PR, which has established its own international network alongside the main creative agency. It was named as UK mid-size consultancy of the year in the 2017 PR Week awards. M&C Saatchi Sport & Entertainment specialises in sponsorship marketing and is now the #3 in its field in the UK behind two subsidiaries of rival group Chime. In 2013, the group moved into a new area with the purchase of a controlling stake in talent management agency Merlin Elite, now M&C Saatchi Merlin. Several other units - integrated services agency IS (formerly Immediate Sales), political lobbyist Influence, design agency Rare among others - have been shuttered or merged into other units. Branding consultancy Clear has been once of M&C's more troubled units, but continues to operate as a separate unit. It is partnered by Australian branding agency Re, which also has an office in London.

The company also has an expanding worldwide presence, especially in the Asia Pacific region. By early 2015 there were offices in 20 countries, including seven in the Asia Pacific region, and seven in Europe. Several of these are joint ventures. As of summer 2013, the Chinese outpost is a joint venture with local agency Aeiou. The office in India is a partnership with local creative agency Dhar & Hoon. It absorbed smaller rival February in 2014 to become M&C Saatchi February. M&C first established a South African agency in 2001, but pulled out of the territory a year later, selling its stake to local management. It re-entered the market in 2010 with partnership M&C Saatchi Abel, now active in both Johannesburg and Cape Town. It bolstered its position with the acquisition in 2015 of admired digital agency Creative Spark.

M&C also entered Brazil in early 2009, establishing an advertising start-up in Sao Paulo, built around the acquisition of local market research agency market research business Bolze & Buosi. It bolstered that business in 2015 through a minority stake in creative agency Santa Clara. M&C Saatchi Chilanga opened in Mexico City in 2017. In Spring 2011, M&C Saatchi Russia opened in Moscow in partnership with local agency EMCG, followed at the end of 2012 by M&C Saatchi Nordics. Based in Sweden, it also serves other markets in Scandinavia.

The group also has a presence in several of the main continental European markets. A French office, M&C Saatchi GAD, opened in 2005, run by three senior executives poached from Leo Burnett. It bolstered its offering in 2008 with the acquisition of web design agency FCinq, which now operates under the M&C Saatchi Digital banner. A German office opened in Berlin in 2006, as a result of the purchase of a majority stake in local shop International Projects. A Spanish shop was closed in 2001, but in Spring 2007, M&C acquired an initial 25% holding in Grupo Zapping, which owns a collection of advertising, marketing and design agencies in Spain. Plans to raise that holding to 75% by 2010 were suspended in 2009 as a result of poor performance. The group's first Swiss outpost opened its doors in early 2009, followed by Italy. There are also offices in three Middle Eastern markets as well as Israel through a majority shareholding in Tel Aviv agency Ben-Natan Golan.

In a presentation of its 2012 results, M&C identified its top ten clients overall that year. They were, in country order, Boots, Dixons, Ikea, O2 and RBS (mainly in the UK); Commonwealth Bank, David Jones and Optus (in Australia); Celcom (in Malaysia); and Ferrero (in Germany).

Financials

In July 2004 the company issued an IPO for just over half of the company's shares. It has reported steady growth since then. For 2012, combined revenues rose 11% to almost £170m, despite a 3% slide in global billings to £503m. Impairments and accounting adjustments took some of the shine off bottom line, with pretax profits plunging 38% to £9.9m. However, excluding these non-cash charges, the group claimed a 10% rise in headline pretax profits to £17.2m.

M&C Saatchi reported solid performance for 2013, which was on paper at least not quite as impressive as the "outstanding performance" championed by chief executive David Kershaw. Consolidated revenues, including a part-year contribution from Walker Media, rose by 5% to £175.6m. However pretax profits slipped 13% to £8.6m, and a £7m gain from the sale of a 75% stake in Walker to Publicis was offset by a large negative adjustment for minority shareholders' put options. Continuing revenues, excluding Walker, were £162m and the group reported a £2.5m pretax loss, or almost £6.8m net.

M&C Saatchi reported lacklustre performance for 2014, though there was superficially an improvement on 2013. However the underlying figures were obscured in a fog of adjustments, headline figures, constant currency comparisons, splits between continuing and discontinued activities, and payouts to multiple equity partners in its offices around the world. On a statutory basis revenues slipped 3.5% to £169m (because of the sale of Walker Media to Publicis Groupe). Pretax profits fell 27% to £6.2m, and net profits by 42% to £1.9m. Stripping out the proportion of profits accruing to minority partners, the attributable final figure was a net loss of £155m, compared to a £1.5m net profit in 2013.

Stripping out Walker the figures looked a little better, with continuing revenues up 4% and a better-looking bottom line. However there was still a sharp 44% plunge in operating profits. The figures coincided with some brutal truths highlighted in Campaign's "School Reports" survey, in which M&C got one of the lowest marks of any major agency, and fell 10 places in the billings rankings to #19. A "headline pro forma" comparison offered by M&C, with multiple items stripped out from both 2014 and 2013, appeared to show positive growth on all fronts, but not even that version of the numbers could disguise the fact that the group lost two of its biggest UK clients (Dixons and Direct Line) during the year.

There was significantly better performance in 2015. Revenues recovered by 6% to £178.9m, on billings of £375m. Group net profits soared to £6.5m and attributable net profits after minority interests rebounded from the previous year's loss to £6.5m. The UK remains the core of the business, accounting for just under half of revenues at £84.2m, and attributable net profit of £5.4m. Account losses and currency caused revenues from Asia & Australia to slip once again to £42.1m with attributable profit of £2.6m. Europe contributed revenues of £22.7m, the Americas £21.4m and Middle East & Africa £8.5m.

M&C Saatchi's continuing global expansion delivered a big boost to topline in 2016, with revenues up by 26% to £225m, on billings of £458m. Even at constant exchange rates the lift was a whopping 19%, while like-for-like growth excluding acquisitions was an exceptionally healthly 9% (better than any of the group's larger marketing services rivals). The biggest contributors were SS+K in the US, and strong performance in South Africa and Australia. That was the good news. Bottom-line wasn't anything like as strong, at least on a reported basis, with net profit plunging by almost two-thirds to £3.3m. That was the result of multiple impairment charges, revaluations and provisions for future earn-outs.

On a headline basis, with those exceptional and non-cash items excluded, the group claimed a 15% increase in effective net profit to £15.4m. The main UK agency remains weak. It was the group's only regional division to report a decline in annual attributable profit in 2016, which fell to £4.4m on revenues of £88.5m. Asia & Australia rebounded to revenues of £52.5m, and profit of £3.5m. The Americas region was the next biggest with revenues more than doubling to £50m, and the group's biggest divisional profit at £5.0m. Europe contributed £26.7m, with the Middle East & Africa at £11.7m.

M&C Saatchi reported record results for 2017. Revenues topped £250m for the first time, up 12% year-on-year (or 7% at constant exchange rates) to £252m. The group's three regional divisions in Europe, Middle East & Africa and Asia & Australia jumped by between 23% and 26% each, an extraordinary achievement. Meanwhile, the UK managed a solid turnaround, up 6% as a result of strong contributions from PR, sponsorship and mobile. The Americas were the weak spot, down 3%. Statutory net profit jumped 37% to £4.6m, helped by adjustments. Headline profit before tax was up a slightly less dramatic but still strong 16%.

The UK remains the powerhouse of the business, with revenues of £94.0m, and headline profit before tax of £9.0m. Next comes Asia & Australia with revenues of £44.6m and headline PBT of £5.7m. The Americas added £44.6m on the topline and £1.5m PBT; Europe contributed revenues of £33.5m and PBT of £3.4m.

Management

M&C Saatchi is controlled by a board of four senior partners: Maurice Saatchi and Bill Muirhead (also executive directors), Jeremy Sinclair (group chairman, and also the Saatchi brothers' long-serving creative head) and David Kershaw (chief executive, M&C Saatchi plc). Each holds a equal shareholding of just under 6% in the business. Most of the remaining shares are publicly held.

Jamie Hewitt is finance director. The group established a global management board at the end of 2008 headed by Moray Maclennan as worldwide CEO. Tom Dery was named as executive chairman, Asia Pacific & US, until his retirement in 2017. Other senior executives include Richard Morewood (president & CEO, M&C Saatchi Asia & Australia), Marcus Peffers (COO, Europe), Geoffrey Hamilton-Jones (chairman, Brazil/Latin America), Benjamin Bittman (global network director), Richard Storey (group strategy director) and Huw Griffith (CEO, North America).

The main UK office is now headed by Tim Duffy (group chairman). Camilla Harrisson, previously chief executive, M&C Saatchi London, resigned in 2014 to join Anomaly and was replaced by Tom Bazeley, co-founder of Lean Mean Fighting Machine. He too left abruptly in 2016. Giles Hedger was appointed as chief executive in 2017. ECD Graham Fink left in 2011 to join Ogilvy China and was eventually replaced in 2012 by Elspeth Lynn. She too moved on in early 2015, and was eventually replaced by Justin Tindall at the end of the year. Other managers include Richard Alford (managing director), Sharon Browne (new business director). Kate Bosomworth joined at the end of 2017 as chief marketing officer; Raquel Chicourel in 2018 as chief strategy officer.

SS&K is still run by its three original founding partners Lenny Stern, Rob Shepardson and Mark Kaminsky, along with COO and managing partner Kate Rothen.

Although his initial remains above the door, Charles Saatchi played an increasingly marginal role in the running of the agency following its formation. He effectively retired from the advertising industry altogether at the start of the 1990s, becoming instead the country's most high-profile collector of modern art, and the founder of the Saatchi Gallery. He resigned as a director of M&C Saatchi in 2004 and sold his remaining 7% shareholding back to the company in 2006.

Maurice, now Lord Saatchi, has held several other roles outside the industry. He is a prominent member of the parliamentary House of Lords and was co-chairman of the Conservative Party from 2003 to 2005. During the 1990s, he was the principal shareholder in publicly quoted media services group Megalomedia. That company spent widely on a variety of investments, including contract publisher Forward Group, digital effects house FrameStore, recruitment consultancy Graduate Appointments and new media design agency Webmedia. The latter failed in 1999, FrameStore and Graduate Appointments were sold to management in 2000 and 2001, and Forward was acquired by WPP. Megalomedia then bought back its public shares, with a view to operating as a private investment business. In 2002 the company changed roles entirely, acquiring cake maker Memory Lane Cakes, and changing its name to the Finsbury Food Group. Lord Saatchi is no longer involved. The brothers also found time to fund the launch of the Saatchi Synagogue in West London. Separately, the M&C founding partners set up investment company Saatchinvest in late 2001 to invest in entrepreneurial businesses or brands being divested by major marketers.

Background

The storm behind the founding of M&C Saatchi has done much to add to the mystique which still surrounds the agency. By 1994, Saatchi & Saatchi was in serious trouble, too big, too unfocused and burdened by a huge amount of debt. At the end of the year investment banker David Herro, the fund manager of Harris Associates, the group's biggest shareholder, led the board of directors in vetoing Maurice Saatchi's proposed £5m bonus package and dismissed him as group chairman. Within hours, brother Charles had also handed in his resignation, followed by a team of senior executives including worldwide CEO Bill Muirhead, executive creative director Jeremy Sinclair and agency chairman David Kershaw.

As word of the coup spread, several of Saatchi's biggest clients also began to suggest they might jump ship. In the end however only British Airways and Mars's Pedigree petfood arm decided to follow the outcast management group. (Pedigree later moved on in 2000 following a global realignment of the account). With such strong backing, it didn't take too long for the new agency to open its doors and M&C Saatchi began operations in early 1995. One key stumbling block, especially in relation to the very international British Airways account, was the fledgling agency's lack of a worldwide network. As a result, M&C formed a strategic alliance with French group Publicis, which agreed to handle the account in territories where M&C had no representation.

Shortly afterwards the agency began work on the re-election campaign for the Conservative Party. This work, especially a controversial "demon eyes" poster of Tony Blair, grabbed headlines in the UK. However it failed to help the Conservatives stay in government, and they endured a crushing electoral defeat. Maurice Saatchi was created Lord Saatchi, one of the last life peers ennobled by outgoing prime minister John Major.

Over the next few years M&C Saatchi steadily climbed the agency rankings ladder in the UK as a result of a series of high profile account wins. In 1999, it took part of both the BT and Sainsbury's accounts from AMV.BBDO, and won its first car account from Rover, then worth £40m in billings. As a result, M&C overtook Saatchi & Saatchi UK in billings in 2000. The head of another agency which shared a client with M&C described the experience to trade magazine Campaign as being like keeping a gorilla in the lounge - it might seem friendly and docile but you don't dare take your eyes of it for a minute. (In fact, the Sainsbury account was subsequently won back by AMV, while Rover's ad spend shrank substantially following its management buyout).

During 2000, M&C was repeatedly the subject of merger or takeover rumours. The agency was said to be discussing selling a minority stake to an international partner. The purchase of Saatchi & Saatchi by Publicis, also led to suggestions that Publicis might engineer a takeover of Saatchi's by M&C. However neither deal materialised. Instead M&C pushed into the international market, establishing a string of outposts to service its more global clients.

M&C Saatchi issued an IPO in July 2004. Initially this was intended to be a significant minority stake, but poor market conditions and last minute legal claims relating to a former subsidiary threw plans off-track. The shares were floated at a lower-than-anticipated price, with the result that the group was forced to sell around 52% of its equity in order to raise necessary funding. M&C's growth has not been without the occasional obstacle. The most significant of these was the loss in October 2005 of the high-profile worldwide British Airways account, long regarded as one of the agency's key accounts.

Another loss was Nick Hurrell, chairman of M&C Saatchi Europe, who left at the end of 2006 to launch his own agency with partner Neil Dawson, former chairman of TBWA London. Christine Walker, high profile founder and partner in media shop Walker Media, left the group in 2007 to pursue personal projects.

Last full revision 15th November 2017

* Archive page for historical reference only. This profile is no longer being actively updated. See active page here *


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