Grande merger: two locally based Hispanic advertising firms merge to cash in on growing opportunities in ethnic marketing

South Florida CEO, Dec, 2004 by Jennifer LeClaire

Machado/Garcia-Serra Publicidad (MGS) was one of the nation's fastest growing young Hispanic advertising agencies, while the IAC Group held a veteran position as a well-respected national player in the same field.

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Now, the two Coral Gables agencies have merged under the MGS name to create an integrated marketing communications powerhouse with billings expected to exceed $45 million this year. The firm's capabilities run the gamut from advertising, broadcast production and sampling to public relations and sales promotions.

"The combined strength of the human resources of both agencies and the combination of the account bases makes us a formidable player in the marketplace," says Manuel Machado, MGS co-chairman and chief executive officer. The new firm's client roster reads like a who's who: Southeast Toyota Distributors, Publix, Jim Beam Brands, Nortel Networks CALA and Hyundai Motor America, to name a few.

IAC founder and CEO Ana Maria Fernandez-Haar, a fixture in the South Florida business and social scene and an outspoken advocate for Hispanic causes, has courted buyers on and off for years, sources familiar with the situation say. None would comment on the timing of this merger, and financial terms of the deal were undisclosed. But the potential financial benefits are eye opening.

The Latino population grew to 37 million as of July 2001, according to the United States Census Bureau, and now comprises nearly 13 percent of US residents. This makes Hispanics the nation's largest minority and makes the US the world's fifth largest Spanish-speaking nation.

"The Hispanic market's explosive growth is projected to continue well into the next century and Spanish and bilingual marketing communications will drive much of that growth across all industry sectors," says Al Garcia-Serra, Machado's business partner, co-chairman and chief operating officer of the new company. "This is an extraordinary profit opportunity for our clients, our industry and our agency in particular."

Observers agree, after years of growing their business in South Florida the merged firm now needs to take business to the next level. Machado says the merger adds a new dimension of talent, and the company will now focus on building business for its existing clients while adding new accounts. Machado is so confident in the firm's potential that MGS is constructing a new corporate headquarters in Coral Gables, with future regional offices planned for New York, Chicago and Los Angeles.

The MGS-IAC merger appears to be a boon for its principals. Still, 70 percent of mergers fail to achieve their anticipated value, according to The Weekly Corporate Growth Report. The reason, says Andy Cagnetta, president of Transworld Business Brokers in Fort Lauderdale, is that most executives fail to integrate the company properly during a merger, for example the management of employees and client relationships.

"If the new leader doesn't communicate the vision, the company literally remains two separate companies and the whole purpose of the merger is never realized," Cagnetta says. "Even if everybody does buy in, there could still be corporate culture clashes. You also have to sell your customers on the merger and convince them that they are not going to get lost in the sauce."

Gabriela Alcantara-Diaz, formerly executive vice president at IAC, is the new company's principal and executive vice president. Alcantara-Diaz plays a key role in the transition of the two companies. She says the 22 MGS and 21 IAC employees are now a big family, and she does not predict layoff will occur.

"The merger is invigorating," Alcantara-Diaz says. "There's an infusion of new thinking and a very strong team effort is already underway. Our corporate cultures were very similar. Both firms had national caliber work ethics and a pan-regional international flavor. Even though we used to be competitors it was friendly--not fierce--competition."

Alex Lopez Negrete, president-elect of the Association of Hispanic Advertising (AHA) and principal of Houston-based Lopez Negrete Communications, confirms the "friendly competition" factor among Hispanic advertising agencies. "We've all preached from the same gospel for a long time and we get similar objections from clients, so there truly is a brethren," he says.

Machado says principals from both firms queried clients prior to the merger to get feedback on the deal and make sure the companies would stay on board. In fact, Machado and his colleagues invested six months of due diligence before agreeing to merge. That client relations strategy paid off.

Ed Sheehy, vice president of sales and marketing for Southeast Toyota, is excited about the firm's new depth of experience. He expects to benefit from the marketing savvy of former IAC employees and its research into the Hispanic market. "Any new business venture will have growing pains," Sheehy says. "We expect that. It's normal. But we are not concerned because MGS has quality leadership and they are committed to making this work."