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Aegis Group Plc Business Information, Profile, and History

carat media company buying

2 Eaton Gate
London SW1W 9BL
United Kingdom

History of Aegis Group Plc

Aegis Group plc is the holding company for the world's largest group of media specialists. In addition to providing extensive audience forecasting research, Aegis purchases space in newspapers and magazines, air time on television and radio, and miscellaneous advertising outlets such as posters.

Aegis began in 1979 in London as a conventional advertising agency called the WCRS Group plc. The initials stood for the names of its founders, (Robin) Wight, (Ron) Collins, (Andrew) Rutherford, and (Peter) Scott. In the company's early years, its organizers focused their energies on expanding and diversifying. In 1984 WCRS acquired the first company in its public relations division. For the first time, the group's shares were listed on the London Stock Exchange.

Three years later, the company purchased its American advertising agencies. WCRS acquired 80 percent of the Ball Partnership, 80 percent of Cohn & Wells Inc., and 100 percent of Pascoe Nally International Ltd., the original name of the company's current sports sponsorship unit. WCRS sold 20 percent of its advertising group to Eurocom, and its shares began to be listed on the New York Stock Exchange. Also during this year, Ron Collins left the agency.

In 1988 the company acquired 100 percent of Corporate Graphics Inc. (a design specialist), 49 percent of Belier Communications S.A. (Eurocom's French advertising consultancy), 50 percent of SGGMD Holding (a French media specialist), 72 percent of CRC (Holdings) Ltd., 80 percent of Synergie Communications Ltd., and 100 percent of Bagenal Harvey Organisation Ltd. WCRS also purchased half of Carat Espace, the French media buying and planning group, for £64 million.

Carat, Aegis's European media planning and buying network, was created by WCRS in 1989. As Aegis's main subsidiary, the Paris-based Carat network is the name most familiar to clients. Carat maintains offices in 18 European countries, serving an estimated 4,000 clients. Its market share is 11 percent, with income generated through fees and commissions. Services include media buying and development of media strategy. Some of Carat's major clients include Fiat, Guinness, Uniroyal, Walt Disney Company, Coca-Cola, Chanel, BMW, Kodak, and Nissan GB. Also in 1984, WCRS acquired the other half of Carat Espace for £131,858,000. The stock-market crash of 1987 had triggered restructuring within the company. Management decided that it was time to sell some of the company's advertising elements, including 40 percent of its advertising group to Eurocom. That same year, Aegis issued 72 million convertible preference shares.

In 1990, the name of the company was officially changed to Aegis Group. The company sold its public relations and design businesses the next year and acquired more media-buying companies. The new goal, Peter Scott announced, was to concentrate on building Europe's leading media planning and buying group. Carat Portugal began operations in February, followed by Carat Russia in June. At this juncture, both Andrew Rutherford and Robin Wight left the company, leaving Peter Scott as the only remaining founder. According to industry journals, Scott intended to expand his media-buying network across Europe. In 1991, Aegis signed the Walt Disney Company, a deal reported to be worth an estimated $100 million. The account involved planning campaigns and buying media in 21 countries for four Disney divisions. In June, a single Carat European Board was created. By September, its shares were listed on the Paris Stock Exchange. Business expanded as Carat Hellas in Greece and HMS/Carat Austria began operations.

In 1992, Aegis received the Queen's Award for Export. Reports indicated that the company's export earnings more than doubled in the preceding three years with overseas revenue representing 95 percent of the company's income. However, 1991 year-end reports show that pre-tax profits dropped 19 percent, the company's first decline after eight years of growth. The drop was largely the result of the Persian Gulf War, which significantly diminished European advertising spending. Although most countries recovered to prewar levels, Britain, France, and Scandinavia, three of Aegis's major markets, did not.

Until his resignation in June of 1992, Peter Scott, chairman of Aegis and Carat's chief executive, was the most visible member of the European network and the man most often credited with steering the company away from advertising and into media buying. In September of 1992, Aegis sold all of its remaining interests in full-service advertising, thereby becoming a specialist in media planning and buying. 'Media buying is a buoyant market and Carat is well placed to expand in the future,' said Lorna Tilbian, an advertising analyst at Warburg Securities. 'But the media-buying market is about to become more competitive.' The main threat comes from large advertising agencies that have centralized their media buying in some countries. Units such as Media Partnership, Initiative, and Zenith, for examples, have already combined to take some business away from Carat. More importantly, the new units are intensifying the pressure on profitability. Pan-European media magnates such as Italy's Silvio Berlusconi and Rupert Murdoch in the United Kingdom pose added competition, as they will have tremendous power to determine advertising rates in the future. French legislation regulating media buying in France may present yet another threat.

Scott's resignation is said to have been linked to the relocation of Aegis's head office from London to Paris, which will become effective in 1993. 'I see myself as having been the builder of the group which now has 60 offices in 18 countries. The next stage is managing the business--I am more an entrepreneur interested in strategy than a manager,' Scott told the Sunday Telegraph, adding, 'Most of [Aegis's] profit comes through Carat.... We were duplicating many parts of the business.'

Scott's departure prompted a drop in shares of Aegis's stock, but a financial reorganization plan was put into effect to counteract the impact of the fall in shares and a mounting corporate debt. Aegis's new chairman, Frank Law, and a new chief executive, Charles Hochman, have worked to achieve strength and stability in the company so that it can meet the growing demand for European marketing campaigns.

Analysts speculate that Carat is also actively working to establish a Carat subsidiary in the United States. The latest big advertiser to express interest in Carat is the toymaker Mattel, which has a $40 million media assignment. Mattel might be swayed by some of the same things that attracted Disney toward Carat. After an extensive tour of Carat's Paris headquarters, which is staffed by more than 520 media specialists and buyers, Disney executives came away impressed with the company's extensive research capabilities. (Carat spends $18 million a year on media research.) Unlike buying in the United States, where television air time is negotiated and bought by buyers who rely on Nielsen ratings, broadcast buying in Europe is predicated on a buyer's ability to forecast television audiences and select the best commercial placement. But media-buying specialists have long tried to get a foothold in America with little avail. 'Big bags of money only go so far,' said Gordon Link, worldwide media director for McCann-Erickson. 'Clout in America has more to do with longstanding relationships between media owners and agency buyers than with muscle alone.'

But old ties seem to be loosening as the three American networks are rapidly losing viewers to cable television. Network news is in a losing battle with stations like CNN. In 1990, the networks' audience fell for the first time in history to below 60 percent. This, along with the recession in ad spending, is forcing the networks to cut prices for 'upfront' airtime. In addition, media conglomerates like Time Warner are starting to offer multi-million dollar cross-media deals at discounts for big advertisers. As a result of such changes, several big companies--Nestlé is one--are trying to maximize their clout by consolidating their media buying into a single agency, even if that agency is not handling creative work on some of the company's brands. Such deals may save clients money, but how quickly media buying will now be unbundled depends on how competent the special firms prove to be.

Principal Subsidiaries: Carat France; HMS/Carat (Germany); Carat España (Spain); Carat Italia (Italy); Carat UK (United Kingdom); Carat Scandinavia; Carat Crystal (Belgium); Carat Nederland; Carat Portugal; Carat Hellas (Greece); Carat Russia; Carat Austria; Carat Eastern Europe; Carat Sponsorship.

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12 months ago

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