By Ronn Torossian
Last week's purchase of Kwittken & Co. amidst a lot of noise is the fifth in five months involving a PR firm. There's a lot of talk about the days of independent, privately owned PR firms coming to a close. I, for one, am glad some of my peers are selling their firms.
I'm glad for them after years of hard work they are cashing out, but also glad to be left with a smaller playing field among entrepreneurial agencies that can continue to serve clients of all sizes.
Many PR firms are owned by multibillion-dollar, multinational, publicly traded conglomerates. It's amazing to realize that there are only about 65 independently owned PR firms in the U.S. with more than 20 employees. This is an amazing opportunity for those of us still left with our names on the doors, who are left calling the shots, running the risk on our own, just like our clients.
5W PR is proudly, and defiantly independent. Like many of our peers, we have been approached many times in the last few years with lucrative takeover offers.
Our Own Boss
As an entrepreneur under the age of 40, I couldn't imagine walking away, or merging with a publicly traded company, which at the end of the day, despite all the "partner" talk, is clearly the boss.
Even though we are the 13th largest independent PR firm in U.S., according to the O'Dwyer rankings, and the fastest growing PR firm in the U.S. three years in a row, and have been on the INC. 500 list, we want to accomplish so much more and are just beginning our run in the PR industry.
We alone will decide initiatives which work best for clients, and not those that are driven by the stock price of a holding company or directives from three levels above.We will decide which departments to invest in -- those best for our PR business and not for the advertising, marketing or other associated businesses of our parent company.
We will decide what bonuses/raises to give to employees and they will not be subject to the whims of holding companies that have rules more geared towards ad agencies with thousands of employees than to service businesses like PR that have dozens, or at most hundreds of employees.
Independence Best For Entrepreneurial Clients
I further find myself shaking my head in amazement at the CEO who sold last week saying: "Traditional PR agencies have five to 10 years left in the cycle before they get phased out. Everything is blurring together and traditional PR agencies need to think about how they are going to add to their social and digital abilities and how to expand into other areas."
That's why you sold? Can't an independent firm, well financed and profitable do that without worrying about falling stock prices and multiple divisions of a publicly traded company?
We can sell clients the products they need, and services they pay for just as well as any PR unit of a larger holding company. All agree that traditional PR agencies have to change and adjust, but what's groundbreaking in that?
Like others in the industry, I question the reported acquisiton price of $10-$15 million for Kwittken. It reported just over $3 million in fees in 2009. That's a pretty steep multiple. Even with 30% profits (which is high) that would mean Kwittken sold at 11 to 16 times profits.
I am a huge fan of Miles Nadal personally and MDC Partners. He's a very smart man with a great team and wonderful vision and leadership. But independent PR firms need to stick together and continue to service clients with what they need, instead of what holding companies want us to sell to our clients.
It's been a tough few years for PR firm owners and I think that's why you see some supposedly selling for 15 times profits in an industry which traditional sells for three to five times profits. I think cash flow has been an issue for many of our competitors and they can't do it on their own anymore.
Many PR firm owners are tired, with very low profit margins, and that's why we plan to make acquisitions ourselves. We continue to speak with small PR firms who would like a larger umbrella, without being beholden to stock prices and changing the firm philosophy of entrepreneurship.
5W PR hopes to make acquisitions of our own in the next 12 months.
We remain the right firm for clients of all sizes, like the large Fortune 1000 companies we represent, but also for the small five-person start-ups; we too also cherish working with them.
We will continue to service clients who savor entrepreneurs and want an agency in bed with them and the client' shareholders, not the shareholders' of their parent company and who are more worried about their earn outs than the client work.
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Ronn Torossian is founder and CEO of NYC-based 5W Public Relations, a top 25 independent PR firm. He is on Twitter at @rtorossian5wpr and can be reached at rtorossian [at] 5wpr.com. |