Saatchi and Saatchi is a British multinational communications and advertising agency network with 114 offices in 76 countries and more than 6,500 staff. It was founded in 1970 and is currently headquartered in London. The parent company of the agency group was known as Saatchi and Saatchi PLC from 1976 to 1994, was listed on the New York Stock Exchange and London Stock Exchange until 2000 and, for a time, was a constituent of the FTSE 100 Index. In 2000, the group was acquired by the Publicis Groupe. In 2005, the group went private.
History
Early years (1970–1975) Saatchi & Saatchi was founded in London by brothers Maurice (now Lord Saatchi) and Charles Saatchi in 1970.Fendley, Alison, Saatchi & Saatchi: the Inside Story, Diane Publishing Co., 1995 Following stints starting as a copywriter at the New York City offices of Benton & Bowles in 1965, then at Collett Dickenson Pearce and John Collins & Partners, Charles Saatchi teamed up with art director Ross Cramer, and the genesis of what would become Saatchi & Saatchi was born in London in 1967 as the creative consultancy CramerSaatchi. The consultancy took on employees John Hegarty and Jeremy Sinclair and began to work direct for clients. It was Sinclair's "Pregnant Man" ad for the Health Education Council which first attracted attention to the small agency. Charles's younger brother Maurice joined the business in 1970 after Cramer's departure whereupon it was renamed "Saatchi and Saatchi" and developed into a full-service advertising agency.
As a creative consultancy they had worked primarily on projects for agencies but having become a full service agency they were able to quickly build their own solid client base and, by 1975, this included blue-chip clients such as Associated Newspapers, British Leyland, Brutus Jeans, Cunard, Dunlop, National Magazines, and Nestle. They also worked for the Labour Party.Brad Advertiser and Agency List, July 1975. Published by British Rate and Data.
It was during these early years that the agency produced its first famous ad: the Pregnant Man for the UK's Health Education Council featuring a man who appeared to be pregnant.
In 1975, the Saatchi brothers set upon a ferocious course of business acquisitions. With the reverse takeover of the Garland Compton agency in 1975, they achieved a public company listing and were thereafter able to make rights issues to raise the capital required for their acquisition drive.Goldman – Conflicting Accounts
Garland Compton were a long established, conservative British agency, founded by Sidney Garland in 1927. In 1960, the US agency, Compton Advertising, bought a minority holding so that they could build their own international network, primarily to service their largest client, Procter & Gamble. Garland Compton was also a top 10 agency with big spending clients including Bass, British Caledonian, Gillette, New Zealand Dairy Board, Procter & Gamble, Schweppes and United Biscuits. They had also established a regional network of agencies and, of course, had access to the global Compton network. With the merger, the key management positions were taken by Saatchi people.Advertising Inside Out, Philip Kleinman, Published by W H Allen, London. 1977
With the merger, Saatchi & Saatchi moved into Garland Compton's offices on 80 Charlotte Street in the west end of London; and the agency now found itself in the UK Top 5 agencies for size of billings.Advertising Inside Out, Philip Kleinman.
Saatchi & Saatchi Garland Compton (1975–1988) The 13-year tenure of Saatchi was characterized by a consistent output of creative work and a focused approach toward increasing its international market presence.
Noted work included their campaign "Labour Isn't Working""Labour isn't working" poster on behalf of the Conservative Party before the 1979 UK general election and ongoing campaigns for British Airways, and Silk Cut with whom the agency had long relationships. The agency was seen as producing breakthrough creative work with a bold attitude and employed people who went on to be stars of their industry including Sir John Hegarty, Lord Tim Bell and Sir Martin Sorrell.
The acquisition drive was less about removing competition than about adding to their offering of professional marketing services beyond advertising, and later included an international expansion drive – particularly into the United States. Between 1972 and 1987, more than 35 marketing services businesses were acquired, including four significant ad agency networks. Those acquisitions are listed below:
Year Company Location Business Price 1972 Brogan Developers UK Property Development 1972 E.G Dawes Manchester, UK Advert Agency 1972 Notley Advertising London, UK Advert Agency 1974 George J Smith London, UK Advert Agency £390K 1976 Garland-Compton UK Ad Agency(Merger) 1978 Hall Advertising Edinburgh, UK Ad Agency £1.9M 1979 O'Kennedy-Brindley, Dublin, Ireland Ad Agency £309K 1981 Garrott Dorland Crawford UK Ad Agency £7.84M 1982 Compton Advertising Inc US Ad Agency £56.8M 1983 McCaffrey & McCall US Ad Agency £27M 1983 Hunter Advertising Dublin, Ireland 1983 Gough Waterhouse Sydney, Australia Ad Agency 1984 Cochrane, Chase, Livingstone California, US 1984 Michael Bungey DFS 1984 R.J.A Netherlands 1984 Harrison Crowley UK 1984 Yankelovich Skelly & White US Market Research 1984 McBer & Co US Market Research 1984 The Hay Group Worldwide Management Consultancy $100M 1984 Hedger Mitchell Stark London, UK Ad Agency £3.9M 1985 Siegel & Gale New York, US Corporate Branding 1985 Marlboro Marketing New York, US Sales Promotion 1985 The Kleid Company New York, US Mailing List Broker 1985 Wong Lam Hong Kong 1985 Hayhurst Canada 1985 Campaign New Zealand 1985 Sharps UK 1985 Granfield Rork Collins London, UK £109M 1985 Humphreys Bull & Barker London, UK Ad Agency 1985 The Rowland Company, New York, US Public Relations $10.8M + earnout 1985 Infocom Group I.T Consulting US$31M 1985 Clancy Shulman Associates US 1985 Kingsway Public Relations UK 1986 Dancer Fitzgerald Sample Worldwide Ad Agency network US$75M 1986 Backer & Spielvogel US Ad Agency network US$101M 1986 Ted Bates US and Asia Ad Agency network US$500M 1986 Peterson & Co US Trial litigation advisers US$123M 1986 Campbell Mithun Minnesota, US Ad Agency 1987 Cleveland Consulting Assoc US Management Consultants 1988 Gartner Group Connecticut, US I.T Market Research US$77.4 Scarcely any of the growth of the Saatchi & Saatchi PLC was organic with the only start-ups being The Sales Promotion Agency in 1980 and Financial Dynamics PR in 1986. Whilst their foundation London office was consistently successful in winning new clients, it too was propelled forward in the 1976 merger with the UK operation of the larger Garland-Compton business resulting in its tripling of size and a relocation into the Compton premises. Goldman quotes executives of acquired entities including David McCall (McCaffrey & McCall) and Alan Siegel (Siegel+Gale) saying that they never met Charles Saatchi and that neither brother nor other group management had any involvement in their business after acquisition. There was no drive to achieve back-office economies, no systemisation of process/administration, and no cross-referrals of inter-group business.
Financial mechanisms At its foundation in 1970, Saatchi & Saatchi was financed with £100,000 of capital from the brothers and some backers including the designer Mary Quant and her husband. The initial shareholding was 15% Cannon Holdings (Quant & friends); 42% Charles; 38% Maurice; 2.5% John Hegarty; 2.5% Tim Bell. The company was profitable in its first year. To achieve the first large merger (Garland Compton in 1975) the brothers sold their interest in their business for shares, receiving 36% of the enlarged group, while Compton U.S.A owned 26% and 38% was held by public shareholders. The Compton UK listed status meant that the Saatchi & Saatchi business could now issue stock, and the capital for the subsequent acquisitions was raised by giving existing shareholders the first rights to purchase new stock at a discount.
Commonly, the acquisitions used a part cash up-front/ part earn-out mechanism as perfected by Martin Sorrell. The 1982 acquisition of Compton's U.S. business, for instance outlaid $29.2 million in cash and another $27.6 million to be paid over ten years if the agency achieved after-tax profits of $4.07 million. The rights issue to raise the $29.2 million watered down the brothers' holding to 18% of the combined group.
From June 1988 (see next section), the company began to use redeemable preference shares to raise capital. These securities look like equity and were classified as such on the company's balance sheet but since a failure of the company's share price to rise above a pre-determined threshold at a nominated forward date would enable the preference holders to put their stock back to the company, these instruments were in truth more like interest-paying debt.
Difficulties and decline Difficulties arose after the 1987 Bates acquisition as some clients perceived conflict concerns with other group agencies. Bates clients Warner-Lambert (billings $68 million), RJR Nabisco (billings $96 million), Michelob (billings $38 million), Ralston (billings $12 million) and McDonald's (billings $8 million) all pulled their accounts in the months following that acquisition. Colgate-Palmolive assignments were also pulled from Bates at the same time as their direct competitor Procter & Gamble were pulling business from Saatchi & Saatchi Compton and DFS Dorland due to their conflict concerns. However the London ad agency was still the number one in the profits in the UK in 1987 and the Worldwide Group was performing financially with Saatchi & Saatchi Company PLC recording its seventeenth year of consecutive growth with profits of £124.1M up from m 1986's £70.1M. The Group expanded its public listings to include the Paris Bourse and the New York Stock Exchange.
The brothers in 1987 made their boldest move to date when they made plans for a take over run of the ailing Midland Bank, Britain's fourth largest bank at the time with 2,100 UK branches. The bank's Board rejected the offer in September 1987, openly questioned the qualifications of the Saatchis to be running a bank and may have leaked details of the bid to the press. In the same month Maurice Saatchi met with board executives of the Hill Samuel merchant bank to discuss an acquisition. Once the financial press became aware of the moves the brothers became the subject of unprecedented ridicule with the criticisms focused on the notion that bank customers, staff and shareholders would be able to make no sense of their bank being part of an ad agency group. The City's reaction was swift and in mid-September 1987 the Saatchi & Saatchi share price fell 6.2% in two days.
On 19 October 1987, the world stockmarkets crashed. Saatchi & Saatchi stock fell by 1/3 in twenty-four hours and by mid-October was at £5.48 down from £6.70 in mid-September and £7.05 high of 1987. As a result of the perceptions lingering after the Midland Bank discussions, on top of the general nervousness that followed the crash, by 1988 Saatchi & Saatchi Plc was unable to use its previously reliable rights issue method to raise the capital it needed to continue its acquisition drive.
In June 1988, the company issued £176.5 million of convertible preference shares at £4.41 each to fund its acquisition of the Gartner Group, an information technology market research firm. If Saatchi PLC shares did not go above £4.41 by July 1993, the holders could put the shares back to the company at £4.41 plus a 25% bonus. Saatchi & Saatchi PLC stood to owe £211 million for the £176.5 million of capital raised.