Britain's Saatchis Have Hustled Their Way Into Big League of the Advertising Business
LONDON -- In 1970, when Charles Saatchi was 26, he wanted to build the biggest advertising agency in Britain. Never mind that his 12-person firm was lodged in a tiny office near London's peep-show district. After a few weeks in business, he sent "takeover proposals" to agencies 100 times his size. They snickered.</br></br>Today, however, the marketing world takes Mr. Saatchi seriously.</br></br>Saatchi & Saatchi Co. has grown into Europe's largest ad agency, and a global rival to the top U.S. agencies. Its revenue rose 42% to the current equivalent of $1.03 billion in the year ended Sept. 30. Earnings in the year were up 90% to $11.4 million. Its share price has climbed, too. Even U.S. advertising giants like J. Walter Thompson Inc. are blinking hard. Saatchi & Saatchi "has a voracious appetite" for growth, observes Michael Cooper-Evans, head of J. Walter Thompson's British offices.</br></br>Saatchi & Saatchi's latest moves are causing a stir outside the advertising world as well. In October, the firm agreed to buy Yankelovich Skelly & White, a U.S. market-research group, for $13.5 million. A few weeks later, it snapped up Hay Group, a U.S. management consultant, for at least $80 million. Saatchi & Saatchi says more acquisitions will follow, propelling it into a wide range of business services. (The firm's high stock-market price -- it has been trading at a price-earnings multiple of 21 -- makes it possible to finance acquisitions by issuing stock.)</br></br>The new strategy has touched off controversy. Financial analysts love the plan, and say it will boost Saatchi's earnings. Advertising insiders say it's another sign of Saatchi & Saatchi's obsession with growth. But some clients fret that the expansion is too ambitious, and could blur the agency's traditional focus on advertising.