Merger on Madison Avenue

Superlatives are never exactly in short supply in the advertising business, but the news that came out of the world's largest ad firm last week really was a stunner. Announcing the biggest merger in Madison Avenue history, the Interpublic Group of Companies, the Manhattan-based agency holding company that is the industry's General Motors (1978 billings: $1.9 billion), announced that it was acquiring SSC & B, the U.S.'s eighth largest agency (billings: $750 million), for an undisclosed price. The acquisition of SSC & B (formerly Sullivan, Stauffer, Colwell & Bayles) would boost Interpublic's combined billings to more than $2.6 billion, making it almost twice the size of its nearest international rival, Japan's Dentsu, and all but dwarfing the two other U.S. giants, J. Walter Thompson and Young & Rubicam.

The deal, which is expected to get easy approval from both firms' stockholders, would further increase Interpublic's foreign business, which already accounts for 53% of its revenues ($248.5 million last year). Three-fourths of SSC&B's revenues ($113 million) came from abroad last year. Besides a solid roster of packaged-goods clients (Lever Bros, and American Brands, among others), SSC&B has a reputation for market-research savvy as well as a strong management. Says Interpublic Chairman Paul Foley: "In an acquisition like this, you look for the best professionals. That's the real asset you acquire."

The deal will help SSC&B to act on a long-postponed plan to buy out the 51% of the Lintas agency network still owned by Unilever, the British-Dutch food, detergents and toiletries concern. SSC&B bought 49% of Lintas from Unilever in 1970, but until now has been unable to pull together enough capital to make good on an option to buy the rest.

SSC&B will become the fifth agency under the tent of Interpublic, a company founded on the still somewhat radical idea that an advertising enterprise can prosper by acquiring a lot of firms that are allowed, even encouraged, to compete with one another. The firm's mainstay remains McCann-Erickson, which bills more than $1 billion annually in ads from a long list of blue-chip clients, including Miller Brewing and Exxon. The Marschalk agency, which was a small outfit when McCann-Erickson bought it in 1955, is now one of the fastest-growing U.S. ad firms, handling such heavyweights as Gillette, Heublein and Paine Webber. Erwin Wasey, a West Coast firm that joined the Interpublic fold in 1963, and Detroit-based Campbell-Ewald, a 1972 acquisition, have also prospered. The parent company decides basic policy, sets annual goals and provides central services such as legal, financial and marketing support, but the agencies are left to fight for clients on their own. Says SSC&B President Alfred J. Seaman: "If we had a new business prospect, I would want us to compete just as hard against McCann-Erick-son and Campbell-Ewald as we would against Young & Rubicam."

Interpublic's latest acquisition reflects an accelerating trend toward bigness in the ad business. Part of the reason is that large multinational clients need agencies that can supply a broad range of services from ad production to test marketing worldwide. At the same time, there will probably always be a place for the nimble, specialized "boutique" ad shops that live mainly on their creative flair. The losers in the shifting pattern are likely to be the middle-size full-service agencies that are not big enough to compete with the leaders and not agile enough to beat out the small fry. In the future, predicts Interpublic President Philip Geier Jr., "there will be a lot of large companies and a lot of small ones." And Interpublic, he believes, will stay at the top.

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