Mergers and acquisitions among promotion agencies started rolling again near the end of 2001 — a year that had largely been marked by their absence.

“We’ve turned the heat on under the acquisition burner,” says Thomas Harrison, chairman of New York City-based Omnicom Group’s Diversified Agency Services, home to 100-plus promotion, direct, and p.r shops assembled in a loose network that is encouraged — but not required — to work together.

Harrison made the remark after Omnicom announced that it had purchased The Promotion Network, a Dallas-based independent shop with an impressive client list boasting Sharp, Gatorade, Nabisco, and 7-Eleven.

Founded by former McDonald’s executive Roger Winter in 1983, TPN has about 110 employees, offices in New York City and Chicago, and revenues in the $15 million range. Chief executive Winter and the agency’s other two principals, president Sharon Love in New York and executive vp Rich Feitler in Chicago, will remain at the helm under “long-term” contracts, Winter says.

Omnicom pursued the shop despite Winter’s initial rebuff because “it’s not just a sales promotion agency. It’s a very strategic and unique promotion company,” says Harrison. “When someone says, ‘We’re not for sale,’ that usually means they’re onto something good.”

“If it had been anyone but Omnicom, we wouldn’t have done it,” says Winter, who in the past has professed a decided preference for independence. “But we liked Tom and what he had to say.”

Harrison’s pleasing words specifically centered on the “laissez faire” strategy at DAS, where agencies are primarily left to operate on their own. Cooperation among network agencies is encouraged (forums are held regularly to facilitate collaboration) but not required. “We don’t dictate anything, and I think that’s what attracts a lot of people to this organization,” says Harrison. “We buy very strong companies with good leaders, and we let them keep leading.”

Winter says the network benefits began paying off a few days after the deal was signed, when a client called with a problem. “We could have done the creative, but we couldn’t have handled the execution,” he says. “Within hours, we found other resources within Omnicom to help us.”

The Omnicom DAS division also includes such leading promotion agencies as GMR Marketing, TLP, Inc., U.S. Marketing & Promotions, Alcone Marketing, and the Integer Group.

Eastern Intrigue

In a move that gives the agency a much-needed presence on the East Coast as well as in-house field marketing capabilities, Chicago-based Frankel acquired Creative Alliance Marketing & Communications, Southport, CT.

Those service and geographic qualifications meant that 11-year-old Creative Alliance met “both criteria” in Frankel’s expansion plan, ceo Jim Mack says. “They also have good clients, and they’re really good people,” Mack adds.

Founded and run by former Pepsi-Cola executives, Creative Alliance ranked 41 on this year’s PROMO 100 with $5.5 million in net revenues. The shop, which works with several Pepsi brands along with such other clients as Labatt’s, Dewar’s, Sodexho Marriott, and OurHouse.com, has 30 full-time employees but also a network of about 1,000 freelance field staffers.

“This gives us the perfect vehicle to expand our offerings nationwide,” says Jim Kern, who runs Creative in a triumvirate that also includes principals Dominic Lemma and Tony D’Amico. “We could only grow our business so much organically.”

The two agencies didn’t wait for the contract to be signed before they began working together: The folks at Creative helped Frankel on last fall’s successful account pitch to the Centers for Disease Control (November 2001 PROMO).

New BMOC

Elsewhere, Gen Y media and marketing company Alloy, Inc., which operates the Alloy.com destination site, made two November acquisitions in its drive to become the leading marketer to college students.

In separate deals, New York City-based Alloy acquired the 360 Youth marketing services division of MarketSource Corp. and Target Marketing & Promotions.

Alloy will pay an estimated $34.7 million in stock (by issuing 1.8 million shares) and an additional $13.4 million in cash for 360 Youth, whose assets include such co-op services as the Campus Trial-Pak sampling program and the Campus Fest event tour. The operation generates roughly $15 million in annual sales.

Combined with the July 2001 acquisition of newspaper and campus display company Cass Communications, Chicago, the deal gives Alloy “a dominant position in the college market,” says ceo Matt Diamond. “We’re now the largest media player in the space.”

The acquisition of 22-employee Target adds more firepower on the execution end of the company, says Diamond. The Boston-based shop specializes in event work for brands targeting young adults and has worked with Hasbro, UDV North America, Dr Pepper/Seven-Up, and Frito-Lay, among others.

Target, which ranked No. 59 on the 2001 PROMO 100 with net revenues of $2.3 million and two-year growth of 45 percent, will be aligned with Beantown neighbor Triple Dot Communications, a marketing shop acquired by Alloy in December 2000.

In other M&A activity:

• The Zipatoni Co., St. Louis, completed its sale to the Interpublic Group of Companies, New York City, which first purchased a 49-percent stake in spring 1999. The move “will help assure our future growth,” and give the shop “access to IPG’s resources around the world,” says ceo Jim Holbrook.

  PROMO’s Agency of the Year in 2000, Zipatoni ranked 23rd on the 2001 PROMO 100 with net revenues of $27.2 million and two-year growth of 49 percent.

• Westcott Marketing, Bellevue, WA, entered into a strategic alliance with niche shops in Seattle and Tacoma to form Westcott Promotion Group.

  The new agency combined Westcott’s partnership marketing and consumer promotion expertise with the event marketing capabilities of Kavacom Sports & Entertainment and the production talents of Cascade Printing, Inc. The combined entity has 30 employees.

• Former b. little & co. principals Jordan Bochanis and Lee Rogan reunited to launch Bochanis Rogan Zoom with the help of their former production house.

  The backbone of the creative concepting and execution shop is the former Zoom Design, Baton Rouge, LA, a seven-year-old production house that worked with Bochanis and Rogan in the b. little years.

Bochanis most recently was executive concept director at TLP, Inc. Rogan was president of The Geppetto Group, a kids marketing agency owned by WPP Group. The two will open an office in Wilton, CT.

Priceless Review

Purchase, NY-based MasterCard International in November sent out a request for proposals to a number of agencies including incumbent Ryan Partnership.

VP-global promotions Robin Blunt says the company “regularly reviews each of its agencies to ensure that our partners are engaging in the highest levels of service and quality programming.” He declined to discuss what other agencies were participating or the account’s billings.

Six or seven shops including Westport, CT-based Ryan will be selected to make pitches, according to a MasterCard spokesperson. A decision is expected this month.

Direct Media buys back the firm from Acxiom

Coaxed out of semiretirement late last year to negotiate a management buyback, Direct Media Inc. founder Dave Florence signed a contract in February to repurchase his old firm from Acxiom Corp.

Florence, who will lead the revitalized list management/brokerage firm as CEO, says that management has acquired 51% of the company with the option to buy the remaining 49%. The purchase price was “in the general neighborhood of what we sold it for,” he adds. Acxiom purchased Direct Media in 1996 for a reported $26 million, with a later stock split adding to the price. The agreement is retroactive to Feb. 1.

Publicly held Acxiom, Little Rock, AR, financed the repurchase. It will be paid over seven years at 6% interest with an option to prepay.

And what is management buying?

The company currently employs 240 employees and generates $30 million to $35 million in annual commission revenue.

Does that make it the top list company, as it was prior to 1996?

“In those days, we were probably three or four times bigger than the second-biggest firm,” says Florence. “Now, we’re just a little bit bigger than the next two or three biggest.”

And how will it be run?

Greenwich, CT-based Direct Media Inc. will be operated as a privately held independent company, with Acxiom acting as a minority partner. The agreement has allowed Direct Media to assume all current receivables, so the firm has had a “tremendous cash flow from day one,” says Florence.

Besides Florence, the manager-partners include Max Bartko, group president of sales and marketing; Larry May, head of fundraising; May Katz, head of the international brokerage division; Delores Ryan Babcock, a senior broker; Sally Blum Coughlin, head of the Chicago office; Rosemarie Montroy, a manager and broker; and Rick Sarli, the firm’s CFO. More partners are expected to be named.

In addition, a number of former employees are returning to the firm. Former CEO Bob Foehl will come back on an interim basis acting in a consultative capacity to help guidewhat is expected to be a “seamless” transition, says Florence. Veteran Suzanne Hegarty has returned as a full-time broker.

After Acxiom bought Direct Media, it divided the integrated company into four distinct divisions – consumer list management, consumer list brokerage, business-to-business list management, and business-to-business list brokerage – requiring each division to grow at an annual rate of 20%, a difficult task, says Florence. “Our core companies are not going to grow 20% a year,” he continues. “That’s how you spin out of control.”

The company’s focus will now change from Acxiom’s concentration on financial performance – a typical emphasis for publicly held companies – to meeting the needs of its clients.

“We didn’t have an ironclad profitability formula that was applied to all clients,” explains Max Bartko. “Sometime you have to invest money in one segment to grow it.”

The four divisions set up under Acxiom are now being integrated into one highly decentralized company, a successful business strategy long employed by management of the old Direct Media.

Florence and Bartko hope to return to the collegiate style of the old company. “We will work as a team,” says Bartko. “If that means we have to put two brokers on an account to get a different perspective, we’ll do it.”

Industry insiders wonder whether Direct Media can reinvigorate its business – especially in the light of recent staff departures. The firm lost up to 17 employees to MeritDirect, Stamford, CT, a direct marketing firm founded by Ralph Drybrough, former senior vice president of business list services for Direct Media (see story, page 85). Drybrough left the firm last December.

“Obviously there’s been a lot of change with the business unit splitting off and a couple of significant accounts leaving,” says Ben Perez, president of Millard Group Inc., Peterborough, NH. “It may take a little time to work through all of this but I would imagine they would come out in pretty good shape.”

Experts cite Florence’s leadership, a talented pool of employees, a number of important clients, and a great brand as significant components in revitalizing the company.

Mike Bryant, president of Uni-Mail List Corp., New York, says that direct marketing “has always been an entrepreneurial business and big business is not necessarily the right mix or the right fit in what still remains a hands-on people business. It’s good to see that a people business is being reclaimed by the people.”

Despite the defections in the B-to-B division, Florence says that unit remains strong, with five brokers and numerous clients, including five of its top 10 clients, who have committed to maintaining their relationship with Direct Media.

In addition to the loss of staff, Direct Media has also lost a number of management clients. The company currently manages 650 lists compared with the 1,200 it managed in 1996. It resigned most of these lists, or let them go through attrition, says Florence.

He adds that downsizing was part of the company’s plan to refocus efforts on its clients.

Florence says a tremendous amount of resources will be dedicated to the interactive operations, DirectMedia.com, to be operated out of the firm’s headquarters as a separate company. The unit has 10 full-time employees and is expected to be dramatically expanded over the next six months.

After the purchase, some of Direct Media’s internal departments had been combined with Acxiom’s. However, after Acxiom employees pulled out months ago in the face of the pending buyback, Direct Media began rebuilding those departments, including human resources, finance and office management.

Direct Media has the option to purchase or lease its computer systems, which are owned and still being upgraded by Acxiom.

Florence said the firm plans to remain at its Greenwich location for the foreseeable future but is exploring options in New York state within a half-mile of the existing office. It still maintains satellite offices in Chicago, Walnut Creek, CA and Toronto.

Early in 1999, Acxiom initiated plans to restructure or sell Direct Media because it was not meeting profitability goals. During that summer, American List Counsel Inc. chairman and owner Donn Rappaport signed a non-binding letter of intent with Acxiom to acquire Direct Media.

However, a lack of support for the deal by brokers within Direct Media not bound by non-compete contracts played a large part in dooming the deal.

Ralph Drybrough has started up a full-service list management, brokerage and e-commerce firm specializing in business-to-business accounts. The firm, MeritDirect, is based in Stamford, CT.

Drybrough, CEO of the new firm, has named nine partners – eight former Direct Media employees and one who had worked for The Lake Group – along with numerous brokers. Drybrough left the employ of Direct Media in December as the firm’s senior vice president of business list services.

The partners are Mark Joyce, chairman; Chad Slater, Paulette Schlotman and Denise Schremmer, vice presidents, list brokerage; Lutz Schremmer, vice president, list brokerage and interactive; Blair Barondes, vice president, database marketing; Monique Gallowitz, vice president, database administration; Rob Sanchez, vice president, interactive and list management; and Linda Pickering, who will lead MeritDirect’s Chicago branch office in Park Ridge, IL. Sanchez formerly worked at The Lake Group in Rye, NY. All the other partners are former employees of Direct Media.

Also named to the interactive division as account executive was Christopher Bluhm, who previously was at The Lake Group.

A number of list brokers have been named. They are Toula Maragevias, Robin Dellamura, Kurt Kelly, Vickie Vallender, Sandy Minor and Erin Devin.

Joanne Taylor has joined the firm’s administrative and accounting group; Betty Vizzo was named executive assistant; David Palmer was appointed vice president of administration and finance; and Tara Smith was hired as administrative assistant. All are former Direct Media employees.

Bonnie Zurek and Justin Denhard are joining Pickering in the Chicago office. Both were former employees at Direct Media’s Chicago office.

MeritDirect, launched in late January, expects to work with a number of service bureaus, including Acxiom Corp., Little Rock, AR, and Creative Automation, Hillside, IL.