by Fred Pfaff and Art Cannon
“With increased resources and access to new geographies, our partnership with WPP will fuel the next level of energy, excitement and opportunity, delivering innovation and creativity at scale.”
– AKQA founder Ajaz Ahmed in the press release (http://bit.ly/Mgz4WN) announcing WPP’s acquisition of his agency.
The big question isn’t what happens to AKQA, it’s whether holding companies will ever create the synergy that rollups promise.
Usually, the synergy promise dissolves into partisanship, expressed as internal competition and unclear roles. The assets don’t readily get combined for sales and delivery of client programs; referrals often happen because they’re part of the bonus plan (a holding company agency exec once told Fred this point blank). And when the big teams do get put together, they’re uber-expensive, special projects instead of the ramp to a new normal. And so the story has gone in the ad space rollups since I was a beat writer and Art was a technologist.
The crux of the problem is this: Holding companies are good at using new acquisitions as BD channels and marketable capabilities. They aren’t built for integrating the knowledge quickly. That’s a missed opportunity, because so much of the prime talent is getting concentrated where it can’t really create the next-gen models.
As one of our clients tells us constantly, adding capabilities to a company or its executives doesn’t necessarily lead to capacity. That’s particularly true with respect to higher-order thinking. And Ad Age’s Michael Learmonth (@learmonth) made the point this morning that “when you buy an agency, you’re basically hire-acquiring everyone there. Client relationships, expertise, but no tech.” Another way to say that is acquisitions add talent but don’t build tech capacity.
There’s more potential to scale technology than, say, media savings (especially since any network exec will tell you privately they can’t afford to give the best deals to the buying Behemoths). Yet every new M&A deal that promises the integration of a new capability or technology doesn’t seem to happen any faster for the acquirer than for the industry itself.
Because holding companies are piggy banks, not think tanks.
If the ad biz stopped to think, it just might wish they were the other way around.