2010 Poised to Signify the Rebound of PR

2010 Poised to Signify the Rebound of PR: Agency Revenues, Margins and M&A Activity

By Rick Gould, CPA, JD

Warren Buffett labeled the 2008 meltdown as the “economy’s biggest flop since the crash of 1929.” The flop he is referring to has indeed had a huge impact on the PR M&A marketplace. The first half of 2009 was relatively flat. The second half only somewhat improved.

The message for 2009: “flat” is the new “up”.

Holding company CEO’s attribute the decline to clients resorting to extreme cost-cutting. Accounts want more service for less cost. Pricing pressure is now the norm. Procurement departments are relentless in their pursuit of driving fees down. Overly aggressive agency spreadheets, screaming out the reality of increasing labor & operating costs, are received with deaf ears and are not drawing much client sympathy.

We can draw conclusions about what 2010 holds for agency revenues, margins, and the M&A landscape by analyzing a couple of key questions.

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How have the major holding companies reacted?

IPG is trying to rebuild its balance sheet. Omnicom and Publicis have made it clear that acquisitions are on hold unless something extraordinary surfaced. WPP’s CEO Martin Sorrel predicts flat revenues right through 2010. He recently classified the present conditions as “less worse than they were.” Huntsworth’s Lord Peter Chadlington agrees with this assessment and is mapping an aggressive strategy for growth in 2010 via acquisition. Miles Nadal, Chairman of MDC Partners, has said “more dollars will go to social media and special events”.

Are there good times ahead?

2009 experienced the most challenging conditions for agencies since the early 1990’s recession. In 2010, most of the marketing service holding companies are looking to drive growth via strategic acquisitions. Based on our 2009 Economic Uncertainty Report, a vast majority of the 157 responding agencies of all sizes believe that revenues and profitability will improve in 2010. But the mood is one of cautious optimism.

For further insight, please participate in our 2010 Best Practices Benchmarking Survey being distributed on Monday, March 1. Participants will have first access to the full survey results once released.

StevensGouldPincus 2010 Benchmarking Survey