Four Reasons Why The Droga 5/Accenture Merger (And Others) May Not Work

This post is a result of the announcement last week that Accenture is purchasing Droga 5, one of the most successful agencies of the last decade or so.  From what I have read, the management of Droga 5 has attempted to insure the maintenance of its culture and its product. Accenture says it has agreed.  I hope so because most mergers and take-overs fail.  I thought I would chime in on why ad agency mergers rarely work, I hope that is not the case with Droga 5.  

   

Generally, it takes a year or two (but not always) for the dominant company to make unnecessary changes which cause the merger to fail.  So much of what happens depends on who is calling the shots

          Most mergers are made for financial reasons

Often, agency management gets older and wants to or needs to sell.  In and of itself that is fine, but in most cases, money drives the transaction.  The selling party rarely insures that key people and culture are protected.   Consequently,many of the reasons why the acquired agency was successful are forgotten. If an agency is in financial trouble, eliminating debt and selling become the primary force behind the merger and culture and people be damned. 

The Droga5 purchase may have been made to enable Accenture to gain a foothold into creativity.  Droga 5 apparently felt that the future of the business lies in consulting.  Time will tell if they are right.  But in any case, to be successful both companies have to continue the model already in place.  The Accenture financial people should not monkey with the formula that made Droga5’s successful.

2     Culture be damned

Before the purchase or merger, rarely is the compatibility of the two companies and their cultures considered by the legal and financial people who run the merger.    I can think of many mergers which have been made for seemingly strategic reasons – a strategic agency or company (Accenture) wanting to have better creative (Droga 5).

The irony is that the acquiring agency then often “knows better:” and believes that the creative agency has too much invested in talent or, worse, they don't value that talent and therefore do not want to listen to the creative or account people.  Within months of the merger, those people start to leave.  There are dozens of examples of this.  The result is that clients also start to bail. And consequently, the merger, rather than being complimentary, ends up one-sided and often one plus one equals considerably less than two. 

3      People be damned

As part of culture, few acquiring companies value the new people they are buying.  Even at the smallest agencies, the guiding force is most often the founder.  If the lead person retires or leaves, it is very hard to keep or regain their vision (Jay Chiat leaving Chiat\Day after TBWA [Omnicom] bought them is a perfect example).

All too often, the new owners believe that they know better than the old.  Wells, Rich, Greene fell apart when Mary Wells retired and her agency was bought by a French company; they brought in all new American leadership who failed to understand the culture that Mary Wells created.  This scenario has happened so often that there is no room here to write about it here. But not understanding the culture of the subservient agency and allowing or forcing key people and clients to leave may destroy the very soul of the acquired shop.

4     Human nature creates change where none is necessary

Instead of studying and learning a new business and understanding why things are the way they are, many companies decide to put their own people in place almost immediately.  New people feel it necessary to put their own stamp on things, even when change is not necessary. The result is to throw the baby out with the bath water.  Replacing key people who run a business or an account just for the sake of change is insane, but a new broom sweeps clean, often causing the agency to loose key accounts and people.

There are many cases where lead account people or head creative executives do not see eye-to-eye with new management.  Rather than letting it play out and figuring out how to live with each other, new senior management either allows these people to leave or forces them out.  Then they are surprised that their accounts often leave immediately afterwards.

Let’s hope none of this happens with Droga 5 and Accenture. Time will tell.