No room for shotgun weddings Featured

9:52am EDT July 22, 2002

The roots of a successful merger between Dudreck DePaul Ficco & Morgan and Hallmark/Tassone lie in a success — and in a failure.

The two agencies had moved into a common office space in Four Gateway Center to see if they were compatible enough to merge. They joined forces to pitch the Allegheny Energy account, an effort that proved successful.

“I think that whole deal helped us get over the culture shock,” says John DePaul, a Hallmark/Tassone principal and former name partner at DDF&M.

But another pitch with a different outcome is also cited as one of the defining moments in the combining of the agencies.

The two staffs worked together at a feverish pace for three weeks during 1997 in a bid to land a major account. The agencies had shared resources on some of their respective existing accounts and jointly pitched for other business since moving in together the previous year.

But snagging this account, they believed, could solidify their relationship and demonstrate how well they could work together. It would be a coup for the partner agencies that had been shacking up to see if they could make a marriage work.

In the end, the business went to another agency, but the effort hadn’t been in vain.

Says Jim Calderone, executive vice president and creative director: “I told [Hallmark/Tassone CEO] Bill Binstock we didn’t get the business, but now we have one agency.”

Working together intensely for three weeks, while failing to land the account, knocked down the last of the barriers between employees who had come from a diverse array of agencies over the previous years.

The DDF&M acquisition has given Hallmark/Tassone a spurt of growth that helps promise to bring the agency to the $90 million mark in capitalized billings in 1999, a gain of $55 million since Binstock took over at Hallmark Advertising in 1995.

Its goal is $100 million by 2000, and $250 million by 2005, and while the clout that a larger agency brings should contribute to that growth, much of it will have to come through acquisitions. Binstock has his eye on Cleveland, Charlotte, N.C., Columbus, Ohio, and Washington, D.C.

Where’s the business?

DDF&M partners John DePaul and Al Dudreck realized years before their merger with Hallmark/Tassone that their industry was changing in ways that meant they would have to grow to remain competitive. The Pittsburgh market has been tough, to say the least, for advertising agencies in recent years.

The exodus or demise of large corporations in the 1980s hit the industry hard, and the remaining big players usually found New York agencies more to their liking.

Agencies concluded that the bulk of new business would have to come from outside the region, but to mount an effort to get those accounts takes a lot of resources. Small agencies began to find it more difficult to compete in an environment that required significant investments in technology to keep up with client demands. Many, like the ones Hallmark/Tassone has acquired, had well-developed specialties but found them difficult to sell to large clients.

DDF&M had some enviable strengths. It had a sizable public relations practice, something that Hallmark/Tassone, which has represented Dad’s Pet Products and Hoover Co. for years, lacked. DDF&M likewise had built a solid reputation and a strong list of long-time advertising and public relations clients.

It landed Kings Family Restaurants in the early 1980s and continues to handle that account, and it had an even longer relationship with Shop ‘n’ Save.

Because the agency was mature and had grown steadily, it had a clear, stable structure that could be put to work in making Hallmark/Tassone tighter organizationally. But DePaul and Dudreck realized that their business wasn’t going to get any easier. And they had to face issues such as the impact of technology on the industry and the investments required to remain competitive.

“At DDF&M,” says DePaul, “it would have been tough for us to come up with the hardware and software needed to compete for the larger accounts.”

Bold fusion

Merging businesses is never easy, and when the enterprises involved are heavily dependent on exceptionally creative human capital, it’s no simple analysis. When acquiring a manufacturing company, both parties bring to the table many more tangible assets.

In an advertising agency, the critical assets are in the human resources, and there’s no easy way to predict how they will respond when confronted with having to forge a new set of working relationships.

A milling machine won’t walk out and go to work for a competitor, and it won’t take customers with it, even if you sell it off. But in a creative enterprise, the people who do the work comprise the bulk of the value, and those people naturally will react to change with at least some resistance.

And let’s face it — ad agencies brim with creative types and powerful egos. So a merger unquestionably raises turf issues and other uncertainties about where they will fit into the new organization.

There are key people that the combined new entity doesn’t want to lose in the upheaval and who could readily be snapped up by a competitor. And there are the principals and long-term employees who identify with the old name.

Principal Tim Tassone recalls the response from one of the principals of an Orlando agency it had acquired when Hallmark/Tassone executed a name change — a move which everyone, including the acquired agency, agreed was necessary. The Orlando agency principal didn’t show up for the press conference to announce the change, and Tassone believes his reluctance was tied to the realization that his name wasn’t going to be out front anymore in a city where he had become quite well known.

Employees don’t take a name change any easier.

“Probably the toughest thing for the employees was to take the sign off the door,” says Dudreck.

Growth through acquisition

For Hallmark/Tassone, growth has been a process of identifying the right partners and going through the necessary steps to make sure that the two entities can work together organizationally once the merger is completed.

Assimilating DDF&M was the largest undertaking of its kind, but by no means the first for Hallmark/Tassone. Binstock and Tassone merged their agencies in 1994, with the objective of building the business not simply by adding accounts, but by acquiring agencies and gaining the muscle to pitch to large clients outside of Pittsburgh.

The ensuing years saw Hallmark/Tassone buying Van Dine Humphrey and Point Communications, as well as a handful of Florida agencies.

DDF&M, meanwhile, had looked at making acquisitions and considered offers from other agencies to be acquired, but the fit was never quite right.

“Both Al and I knew that none of that was going to work,” says DePaul.

At the front end

Mergers are not easy to pull off, but Binstock says the pain can be minimized if the proper work is done up front.

Too many deals, are done for financial reasons, says Binstock, a move he says is a mistake.

“I think we’re careful about not putting ourselves together with companies for financial reasons,” he says. “More often than not, acquisitions and mergers are done because there will be economies of scale.”

When there’s no rhyme or reason organizationally, problems are certain to follow.

“Two CEOs sit down and they work out the numbers,” Binstock continues, “and the numbers make all the sense in the world and they work out positions for themselves at the top ... and they put the two companies together. Guess what? You’ve got a lot of problems up and down the organization, the bigger the organization the worse.”

And when a company tells employees that the merger is for other than financial reasons but does a house cleaning, it risks fostering mistrust.

“When you have a big general meeting and before or right after that 10 people get axed, it doesn’t matter what you say in the meeting,” says Binstock. “You’ve done what everyone thought was the reason to do it.”

If the companies don’t share a similar philosophy, problems can emerge. Tassone recalls a meeting with the owners of an agency from Charlotte, N.C. who was interested in a merger. The agency is a strong creative shop, well respected in its market and would have brought about $25 million in additional billings to the agency, but Binstock and Tassone say they knew it wouldn’t work.

An agency that was creative-driven, they realized, would clash with Hallmark/Tassone.

“Their point of view of how marketing should be done was 180 degrees away from ours,” says Tassone.

DDF&M was, on the other hand, a good fit with Hallmark/Tassone for a number of reasons that went beyond financial. DDF&M offered Hallmark/Tassone an easy entry into public relations.

At the simplest level, there was almost no conflict of clients. Both had solid experience in retail advertising, and both viewed themselves as account-driven, that creative existed to sell something, and the needs of the client drove the creative process.

Teaming with the younger Binstock and Tassone offered Dudreck and DePaul, who found themselves wearing an assortment of hats while running DDF&M, an opportunity to downshift and focus on more narrow areas of the business.

DDF&M’s principals realized that the marriage wouldn’t be a happy one if the cultures couldn’t mix harmoniously or there weren’t enough solid strategic reasons to try to pull it off.

“If money is the only consideration, chances are pretty good that you’re not going to be happy,” says DePaul.

Hallmark/Tassone learned some valuable lessons along the acquisition trail. Acquiring companies have to consider what kind of compensation structure the joining firm has. How will differentials in benefits be reconciled, and how will pay scales be structured? The experience of acquiring the smaller shops taught them to look at those kinds of issues going in.

“I think it taught us, on a smaller scale, how to go about acquiring agencies,” says Binstock.

Technological compatibility is another consideration. DDF&M had a PC-based system, while Hallmark/Tassone operated on a Macintosh platform. On that front, some dissonance remains.

“We’re still battling that,” says Tassone.

Living together

DDF&M and Hallmark/Tassone decided that sharing

office space at Four Gateway Center might be a way to bring the organizations together and give the employees a chance to mix and become accustomed to each other. They settled on a three-year term to live together while each pursued its own business as an independent agency, with an occasional joint pitch when appropriate.

Dudreck and DePaul, with the help of Hallmark/Tassone, had worked carefully to assure their two dozen or so employees that a merger would be good for everyone, that they weren’t going to be hung out to dry. On the first day that DDF&M people moved in, Hallmark/Tassone account people organized a carnival in the offices and hallways to help break the ice.

The agencies worked on their respective accounts, occasionally drawing help from each other. They used the same conference rooms and kitchen, entered and left through the same door. The arrangement was, for the most part, a comfortable one, but problems did arise.

Pitching business together sometimes proved awkward and confusing to potential clients. And there were nagging questions among employees about where they would ultimately fit in as the merger progressed. Even as it became apparent that the two agencies would ultimately become one, people continued to pair off as they had before the partnering. There were lingering doubts about job security.

None of it surprised Tassone.

“We just knew that when we moved in together ... we would have a lot of personal issues among employees,” says Tassone. “It’s human nature.”

A single flag to rally around

Tassone says he ultimately recommended that the agency operate under a single name that would end the confusion and give everyone the sense of a single organization, not simply two ships in the same harbor. The principals agreed on Hallmark/Tassone. Then they brought in a consultant to review the situation and make recommendations.

“She told us we have the typical deep territoriality here,” Tassone recalls.

To break down the barriers, Tassone had employees gather to do SWOT analyses; strengths, weaknesses, opportunities and threats.

“My goal was to have the people of our agency tell me what the strengths, weaknesses, opportunities and threats were, and then to draw conclusions and do something about it,” he says.

The principals then assembled a group of task forces to attack issues and come up with recommendations. Suggestions ranged from how to structure performance appraisals to standardizing management systems to remodeling the kitchen. The Pittsburgh staff continues to meet as a group on a regular basis to keep everyone up to standard.

None of the partners describes the process as a slam-dunk. With two large agencies merging, one made up of several others swept into the fold in a few years, there are bound to be disagreements and uncertainties. Dudreck characterizes it as “eight pairs of shoes under one bed,” but they all agree that the whole far exceeds the sum of the parts.

Only a few people left when the agencies were merging, and Binstock and Tassone write off the departures as amicable and substantially because some people simply like the pace of a smaller shop, and not because they felt they were sold a bill of goods. Binstock credits a strategy of finding a spot for everyone in the company and making sure everyone got the truth up front.

“You have to be clear in communicating,” says Binstock. “The worst stress is not knowing.”

How to reach: Hallmark/Tassone, (412) 471-3308 or at www.hallmarktassone.com

Ray Marano (rmarano@sbnnet.com) is associate editor at SBN.