Update: Leo-MacManus Direct Units Will Stay Separate

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Independent advertising agencies The Leo Group, Chicago, and The MacManus Group, New York, this week announced a merger that likely won't signal significant changes for their direct divisions but will give those units much-needed resources.

The combined entity boasts more than $1.7 billion in annual revenues, making it the fourth-largest global advertising company behind Omnicom Group, the Interpublic Group of Cos. and WPP Group. The move was seen as necessary to compete in an increasingly consolidated advertising marketplace.

The holding company - encompassing Leo Burnett Co. Inc., Starcom Worldwide, a 49 percent stake in Bartle Bogle Hegarty, D'Arcy Masius Benton & Bowles, N.W. Ayer & Partners, The Kaplan Thaler Group and MediaVest Worldwide - will be temporarily referred to as BDM, with headquarters in Chicago. Dentsu Inc., Tokyo, the fifth-largest advertising company worldwide, also will take a 20-percent ownership stake in the new entity. Plans to take the new company public are slated for next year.

Roger Haupt, 51, CEO of the Leo Group, will become CEO of BDM; Roy Bostock, 59, chairman/CEO of MacManus Group, will become chairman, while Richard Fizdale, 60, chairman/CEO of the Leo Group, will become vice chairman. Craig Brown, 48, chief operating officer of MacManus, will become president and chief operating officer of BDM.

Both agencies recently formalized their diversified services units that house direct marketing. Leo Burnett NorthStar, the direct marketing unit of Leo Burnett Co., has clients, including Oldsmobile, Disney, Eli Lilly and Maytag. The group is headed by Pete Volz, who was appointed its chairman/CEO less than a month ago.

D'Arcy Marketing Communications Group, formed three weeks ago as a network of marketing communications companies within MacManus, will include Clarion Marketing and Communications, Highway One, D'Arcy Directory Marketing and IMP in Europe. Clarion direct marketing clients include Capital One Financial, Federal Express, Fleet Bank, General Motors, IBM, Pillsbury and Procter & Gamble Co. Shared Leo Group and MacManus clients include marketing heavyweights Coca-Cola, General Motors and P&G.

Wendy Riches, who was president of global direct marketing and e-commerce at Hasbro, was named president of D'Arcy Marketing Communications Group. Before her one-year stint at Hasbro, Riches was chairwoman of OgilvyOne Worldwide North America, the direct marketing unit of WPP Group agency Ogilvy & Mather, New York.

Both direct units, as well as its general advertising, media planning and buying, and public relations units, will continue to run as separate entities of the merged advertising giant.

"We're going to keep these [agency] brands separate and autonomous," Haupt said. "I think that's the best way for us to continue to grow. I'm not looking to put the major diversified services in the middle. Each brand needs to have its own integrated unit."

Neither agency has built a strong reputation on its direct marketing capabilities, but targeted future acquisitions in the direct and database arena to beef up that area is likely.

"We're going to get more aggressive as we now have the financial resources and global scale of brands," Haupt said. "Right now my focus is getting this deal closed, which won't be done until January. Once it is done, the whole diversified services area is one which is growing exponentially, and you can expect us to be even more aggressive." That growth, he said, would occur in all areas of diversified services and on a global basis. "We'll do whatever it takes to ensure continued success."

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