Merger move benefits ad groups

CNY Business Journal (1996+), Jul 12, 2002 by Dickinson, Casey J

SYRACUSE - September 2001 looked like a new chapter for Sage Marcom President John Favalo. After signing a letter of intent to merge Sage Marcom into Eric Mower and Associates (EMA), Favalo looked forward to putting the two agencies together to battle the soft ad market. Battling the market became a secondary concern on the morning of Sept. 11.

"I called Eric and asked, 'Are you sure you still want to do this?'," Favalo recalls. "He told me we were going to focus on the future, so that's what we did."

Eric Mower, chairman and CEO of EMA, says he and Favalo had discussed bringing the two companies together in the past, but a year of shrinking ad business nationwide helped both men decide that the time was right.

"The advertising business is in a 100-year storm," says Mower.

Sage Marcom, had built a name as a business-to-business agency offering strengths that complemented EMA's existing business lines, Mower says. The combination has been able to continue through tough times while keeping staff cuts to a minimum. EMA employs 80 in Syracuse, 60 in Buffalo, 20 in Rochester, 15 in Atlanta, 15 in Albany, and four in Portsmouth, N.H. The agency had billings of $136 million last year and moved up to No. 73 on the Adweek list of top agencies in the nation. There are more than 10,000 ad agencies in the United States.

Mower is candid about the need to eliminate staff duplications in order to remain competitive.

"Any time you bring two companies together, there are going to be job cuts," he says. "We tried to minimize the duplications before the merger."

The agency allowed many personnel to take jobs in other parts of the company before making any consolidations.

The national downturn in advertising began in October 2000, says Mower. Advertising agencies and public relations lead a recession and trail a recovery, he adds. Cutting advertising expenditures is a quick way to save money for many companies, explains Favalo, now manging personal partner and director of B2B services at EMA.

"One company makes cuts," he says, "then their competitors follow."

Media billings for 2001 were down 10 percent nationwide, according to statistics compiled by Advertising Age. Advertising in all media dropped 6.5 percent last year, to $231.3 billion from $247.5 billion in 2000, according to Universal McCann's agency's 2001 advertising spending report.

Both men say the Upstate market is particularly difficult for the agencies because of the region's smaller business community and proximity to major markets.

"We're all chasing after the same companies," says Mower.

Competition from concentrations of agencies in nearby cities such as Toronto, New York, and Boston, as well as the relatively few big Upstate accounts can make business tough sometimes.

Mower says area agencies need to get larger to compete nationally, and he's already looking for more acquisition opportunities.

Two days after going public with their merger plan, Favalo led his staff over to EMA for a joint discussion on how to merge the two companies. The staffs met to form transition committees that would integrate the two agencies. The discussions, says Mower, were an important part of bringing new employees aboard smoothly through consultation and cooperation. Previous mergers in Syracuse, Rochester, and Buffalo have given Mower experience in meshing teams, he explains.

"What you see is not always what you get," says Mower.

Years of "watching each other over the fence" and personal interactions helped reduce the anxiety involved in bringing the companies together, he adds.

In deciding the best practices, EMA discovered that Sage's office intranet was far superior to what EMA had been using, says Mower. The agency subsequently adopted the "Netwit" intranet system in all its offices. The adoption of Sage's intranet was a signal that the move would be a true combination, says Bob Hite, creator of the Netwit system while vice president of operations at Sage, now director of ebusiness solutions at EMA.

In past mergers, the name of the combined entity had been a sticking point, says Mower, no fan of combined names. Favalo decided to drop the Sage name rather than opt for a hyphenated company name.

"Mergers are as much personal as professional," says Mower. "John put the professional over the personal."

Cooperation between the EMA offices is also a part of the company's business strategy. Sometimes, says Favalo, clients may benefit from another type of marketing service than the one they initially selected. Account executives aren't punished for referring clients to another service department of the agency.

"There's only one bottom line," says Mower.

In November, 40 Sage employees transferred from Sage's Erie Boulevard office to Bridgewater Place, the former factory into which EMA moved during the late 1980s. The office had been built to accommodate more employees, in anticipation of future mergers. Each former Sage employee has gone through the EMA new-employee orientation, as well as special teambuilding events. One event pitted Favalo against senior account supervisor Joseph DiVirgilio in an Italian cooking contest. The agency converted its auditorium into an Italian restaurant for the event.