Ad agency mergers herald new era. (small shops benefit most) (includes related article)

Ad Agency Mergers Herald New Era

Megamergers.'

"Merger mania.'

"M and As.'

The phenomenon of huge ad agency mergers and acquisitions is only six months old, but already the buzzwords come easily to the lips of New England advertising executives. These people are in the business of selling, after all, and when they're selling themselves, the voices are loud and sure.

In Boston, the merger and acquisition game has been played with gusto. Since the start of the year, there have been five acquisitions involving Boston agencies. Three were cases of one Boston agency acquiring another, and in one of these mergers, the resulting company was a $145 million agency which leaped to second place on the list of the region's largest shops. Two others involved Boston offices of outside agencies which were affected when their parents merged. In all but one case, the links to larger agencies in New York or abroad grew tighter.

Compared with this spring's "Big Bang' mergers in New York, which created superagencies with more than $5 billion in billings, the Boston deals seem small potatoes. Nevertheless, the acquisition activity in Boston does herald a new era for New England advertising.

Although agencies in Boston still can't compete with their New York cousins for the biggest accounts, three of them now bill more than $125 million a year, placing them on the "list' of agencies that many national advertisers will consult when their account is under review. (See story on p. 19.) Despite whispers of doubt about the wisdom of mergers and acquisitions from some ad people, most agree they are likely to continue.

What's actually driving the mergers? There are many answers.

"The attractiveness of agencies to investors is something that has never occurred before; that's the driving force,' says Peter Evans, president of HMB/ Creamer Inc.'s Boston office.

"There's a mentality that you have to be a certain size to play in a certain league,' says Greg Farrell, managing editor of New England Ad Week.

"The management of a lot of these companies is approaching 60-65 years of age. They've got to be thinking. "How do I get my money out?' Merging or acquisitions is a way to get their money out,' says Paul McDermott, an advertising and communications consultant and the former director of the Advertising Club of Boston.

In truth, it may be a combination of all these factors. Richard L. Warren, president of Giardini/Russell Inc. in Boston, says, "A lot of the mergers that are happening are mergers that would have happened over a period of time, but are just being hustled up, because the timing is so good.'

MAKING IT WORK

The present merger scene dates to January 1984, when Humphrey Browning MacDougall Inc. …