Thursday, October 29, 2009

Major PR firm sale

News that Michael Sitrick is selling his Los Angeles-based firm to an Orange County-based turnaround firm creates an interesting question about whether more deals could occur.

This story in The Wall Street Journal explains why Resources Connection is creating a one-stop shop for firms in distress. (Note: Some may find it interesting that Michael agreed to be interviewed by the Journal, the same paper he was battling just a few months ago after the Journal broke a major controversial story about an Orange County financier who may have been conducting a Ponzi scheme. But if you know Sitrick, he is a master of dealing with the news media.)

For a couple of reasons, the Sitrick-Resources merger/acquisition makes sense. Most obvious is that companies will continue to be in distress and will need consultants who can offer expert services.

Offering a single location for multiple, related services has been the mantra for major media giants like Omnicom and WPP. Advertising, marketing and public relations all seem to go together, allowing for like-minded management and business operations.

The Sitrick-Resources marriage appears to step out of the safety of symbiotic operations. Yes, the model looks logical. It made sense to the firms involved. But, the question is whether two very different types of businesses can blend operations, two different types of mindsets can aim in the same direction?

How many times have we seen mergers fall apart? AOL-Time Warner seemed like a good idea. How many major corporations are forcing non-core business units to prove themselves? Look at Proctor and Gamble putting the challenge to their acquired units.

One thing the Sitrick-Resources marriage lacks is Investor Relations. I mean, real IR expertise. An IR firm was probably behind the scenes of the acquisition. IR firms do well in both good times, when companies are buying other companies, and in bad times, when companies are buying struggling companies. The merger and acquisition pace has only slowed for brief periods.

IR firms, like Abernathy MacGregor, also specialize in the same kind of crisis communications that Sitrick offers, but most only do it quietly. They have to keep the volume down because they usually are working for publicly traded companies.

Which now leaves us with another question: Is the Sitrick-Resources marriage limited only to private companies and other organizations?

If so, what will the market bear in terms of similar mergers? Will a WPP or Omnicom begin to search for the kind of firm filled with the counselors and specialists at Resources?

Stay tuned. Comments welcomed. Prediction: A few more "like" mergers are coming.

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