Media Meltdown

With urban marketing hot, black agencies are the prime targets for aquisitions and mergers

of fact, we already shared a relationship with the Coca-Cola Co., and have since gained the agency of record assignment of Soft Sheen, a division of Publicis’ client, L’Oreal.”

Will the tag team effort spell big business for Burrell? Heide Gardner, vice president of diversity and strategic programs at the American Advertising Federation Foundation (AAFF), a national trade organization based in Washington, D.C., predicts high marks, and says, “I expect to see a lot of business from Burrell as it continues to aggressively leverage its relationship with Publicis.”

While the terms of these two deals were not disclosed, it is generally believed that agencies can go for 1.5 times their revenue. In Burrell’s case, that could amount to $ 32.7 million, according to Advertising Age.

“These mergers are good because they recognize the sweat equity that multicultural agencies have put into the business,” says the AAAA’s Donahue. Nonetheless, there are still some skeptics. “Despite being minority owned, you certainly cannot deny the fact that the large company is going to influence the culture and take some control out of African American hands,” says Gene Morris, president of Chicago-based E. Morris Communications (No. 8 on the BE ADVERTISING AGENCIES list, with billings of $ 27.1 million), which recently add
ed Ralston Purina to its client list. E. Morris, which also has McDonald’s (regional), Wal-mart and Oldsmobile accounts, was scoped out by general-market agencies as well.

PENDING CONFLICTS
Despite the boon for black-owned agencies, a downside hovers: sibling rivalry. “General-market agencies are conglomerates, and there is a threat that conflicts and competition could breed among black agencies under the same corporate umbrella. The question is: will they be seen as separate when they go after business in a category in which their ethnic counterpart already has an account?” warns Smikle, referring to the True North/Coleman/Stedman Graham & Partners marriage. For example, to avoid a conflict of interest, an agency can only have one account in any given category, so if one has a fast-food client, then it can’t go after another one. While a strong concern, “these conflicts are nothing new for the general-market agencies located under one roof that are forced to compete,” says Head. “For the holding company it is a way to pitch for all existing soft drink or automobile accounts and, if successful, garnering a larger portion of a category’s business in their pocket.”

Another thorny issue is the National Minority Supplier Development Council’s (NMSDC) move this past February. Under a new guideline, an agency certified as minority controlled can sell up to a 70% ownership stake as long as 51% of voting stock, daily management control and the majority of board seats remain in the hands of minorities.

“To say that 51% of a voting stock will remain with African Americans is not a reality. Why would someone buy 70% of a business and allow it to remain in
the hands of 30% of the owners?” notes Morris, who is also chairman of the AAAA. “This will only lead to even more front companies and create an

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