Diana Marszalek 26 Jan 2024 // 3:45PM GMT
NEW YORK — WPP’s jolting news this week that it plans to merge BCW and Hill & Knowlton into a $1 billion megafirm called Burson — creating the PR industry's biggest player — has industry leaders questioning what the merger brings to the marketplace besides scale.
“WPP keeps on making massive moves, but they aren’t paying off fast enough,” one global agency leader said. “Slamming things together doesn’t necessarily mean better. This story is about scale rather than the supremacy in specialisms.”
The decision to merge the holding group’s two largest PR firms, set for July 1, comes five years after BCW was created by the takeover of Burson-Marsteller by Cohn & Wolfe. Burson, named for the late PR pioneer Harold Burson, will be led by BCW global CEO Corey duBrowa, who joined the firm from Google last May, as Burson’s global CEO, and AnnaMaria DeSalva, H&K’s global chairman and CEO since 2019, as global chairman.
The combination creates considerable scale in such sectors as healthcare and technology, while the overall firm will employ more than 6,000 people across 43 markets worldwide.
Unlike the BCW/H&K merger, the creation of BCW was more about synergy than size and streamlining — a distinct difference that calls into question whether the creation of Burson makes strategic sense in the same way combining Burson-Marsteller and Cohn & Wolfe into the world’s third largest PR firm did.
And sources note that size is not tantamount to success. Edelman, the world’s first $1 billion firm (which Burson is positioned to usurp as the world’s largest), has “struggled" in recent years, as did BCW in the aftermath of its creation, as one comms executive pointed out.
By its sheer nature, an operation as big as Burson runs the risk of losing many of the things that are core to agencies’ business and creative success — a decentralized structure and entrepreneurial spirit among them. The “tight control” WPP tends to have on its agencies could only compound those issues.
At the same time, WPP for all intents and purposes will be doing away with two cachet brands (although Hill & Knowlton will operate within Burson, serving a select group of clients).
“With this move, WPP effectively kills off the Hill & Knowlton and Cohn & Wolfe brands. Two more great heritage brand names gone from the market. Maybe it was time. Who knows?” said Marshall Manson, a former UK CEO of WPP-owned Ogilvy. “I'm sure there is a business case for the merger, but it will take years to play out. But the broader implications worry me. Too many of the big network agencies seem to be getting more generic. Where is the distinctiveness?”
Founded in 1927, H&K has been around for nearly 100 years. Lars Erik Grønntun, former H&K global president and now chairman of holding group Paritee and CMO/CCO of Kahoot, said there was a "certain nostalgia" connected to the loss of the Hill & Knowlton name: “Hill & Knowlton's 95-year legacy was a source of pride for me while I had the pleasure of serving. No other company has done more to spread the craft globally than the 'Grand Old Lady' of the industry; first to expand to Europe, Middle East, Asia, South America and Africa. Hopefully the pioneering spirit and the international outlook is not lost with the name.”
However, Grønntun said he was convinced that Burson would be “a force to be reckoned with across the globe."
Employees are naturally concerned about what the merger means for their livelihoods. Leadership appointments under duBrowa and DeSalva have not been announced; job losses have not been ruled out.
“I think it’s good for shareholders. Probably neutral for clients. And awful for a number of employees affected,” said Next Practices Group managing partner David Gallagher.
This was echoed by a regional network agency leader, who said: “Ultimately this is an efficiency play more than anything else – a hunt for margin and a lowering of cost, particularly through reducing central people and functions – but I am sure some client facing people will unfortunately go too. Do you need two independent crisis teams or design studios for example? The client impact will have to be seen over time and there must be some tricky conflict issues to resolve. Employees will be uncertain and nervous for a while yet I expect. It is the end of an era in many ways."
In WPP’s favor, PR agency leaders universally said they have trust in duBrowa’s leadership ability and laud WPP for naming the new firm in Burson’s honor.
“I think Corey is a first-class guy and a very wise counselor,” said Edelman CEO Richard Edelman. "I similarly want to pay tribute to Harold who was a figure of such stature, and I’m glad the firm was named after him. They will be a worthy competitor and I look forward to seeing them on the field."
Another agency head close to the situation said that while the Burson-Marsteller/Cohn & Wolfe merger "was like 'The Hunger Games'," the founding of Burson "seems a bit more grown-up. Corey is a shrewd operator and is communications-first and client-first. We’ll probably see the organization doubling down on the big strategic comms and brand guardianship piece, and maybe the Burson heritage will bring back some of that integrity to the industry’s reputation.”
And WPP is hardly new to such ventures. The integration of BCW and H&K reflects WPP CEO Mark Read's long-term 'simplification' strategy, which has resulted in the mergers of Wunderman Thompson and VMLY&R, Essence and MediaCom, Grey and AKQA, Sard Verbinnen and Finsbury Glover Hering (now FGS Global), and WPP's various design agencies.
“This reflects a general WPP philosophy to streamline and centralize, but a big challenge now will be conflict management,” said Greg Paull, principal and co-founder of agency consultancy R3. “Few navigate this better than WPP but public relations is a sensitive, high touch, contact sport, and resolving conflict under what was once three agencies will take some management.”
Yet WPP is also looking at having to reconcile a range of differences that typically exist between agencies, from cultural nuances to salary and billing scales.
“Mergers are difficult. Bringing together two well-established agency brands is an interesting development for the industry,” said Omnicom PR Group CEO Chris Foster, a former BCW North America president. “Our strategy at OPRG is to support and promote the iconic brands within our portfolio and to come together as integrated OPRG teams when it best serves the needs of our clients. I am looking forward to seeing how things unfold over the next few months with Burson.”
On the cultural question, former Burson-Marsteller board director and industry veteran Robert Minton-Taylor recalls the long-standing competition between the two firms: “Hill & Knowlton was always considered by B-Mers to be its most closely matched rival. Pitches were hard fought between the two agencies. I know they ended up sharing the same bed in the WPP stable, but there was no love lost between them. I can imagine a lot of B-Mers and H&Kers watching their backs wondering who's going to keep their jobs. How they reconcile the clash of cultures is going to be interesting."
WPP’s announcement this week jarred many, but for others, the plan did not come out of left field, given the economy and WPP’s history. The holding group issued two profit warnings last year, while its PR agencies were hit by “cautious spending trends” by clients in Q3 – with like-for-like revenue down by 0.9% to £283m.
“The holding companies had a rough year last year,” said Chloe Cotoulas, an associate at M&A advisory firm Madison Alley. “So just as we’re seeing across the broader market and especially tech, with a softening or even just less predictable topline due to macro uncertainty, the holdcos are forced to look inward and see where there are cost efficiencies. There’s only so much personnel you can cut because agencies are people-powered businesses, so then you need to start looking for synergies.
“So this isn’t surprising. We’re seeing lots of internal movements from the holdcos either merging their assets or divesting from ones that don’t make as much sense to their core business. We expect to continue to see divestitures and mergers,” she said.
Additional reporting by Arun Sudhaman and Maja Pawinska Sims