Euro RSCG Worldwide S.A.

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Euro RSCG Worldwide S.A.

84, Rue de Villiers
92683 Levallois-Perret Cedex
(331) 41 34 30 00
Fax: (331) 41 34 31 51

Public Company
Employees: 6,800
Gross Billings: Ffr 27.11 billion
Stock Exchanges: Paris London
SICs: 7311 Advertising Agencies; 7319 Advertising, Not Elsewhere Classified; 7331 Direct Mail Advertising Services; 8732 Commercial Nonphysical Research; 8740 Management and Public Relations

Euro RSCG Worldwide S.A. is the leading advertising agency in Europe. With full-service operations in 30 countries and just over two percent of the US$300 billion global advertising market, France-based Euro RSCG ranks seventh among the worlds largest agency networks. The firm is the only one of the industrys leading agencies that is not American, Japanese, or British, and the company has worn its distinctly European mantle with pride. Euro RSCG is part-owned by French media giant Havas Agence S.A. In the early 1990s, Banque Nationale de Paris (BNP), a French bank, held 6.2 percent of the agencys equity, and another French financial institution, Societe General, owned another 1.9 percent.

Euro RSCG is a mega-agency that formed as a result of the rather surprising 1991 merger of Eurocom S.A., Frances top advertising agency, and Roux Séguéla Cayzac & Goudard, the countrys third-ranked advertising firm. The billion-franc union was spurred by global industry consolidation as well as factors specific to the French advertising market. A spate of mergers and acquisitions in the late 1980s had transformed the structure of the global advertising industry. Marketing conglomerates (comprised of a holding company and several individual advertising agencies) that could offer their international clients comprehensive services proliferated throughout this period.

Eurocom evolved from Univas, the international advertising division of French media giant Havas S.A. Havas, which shared ownership of Univas with the French government, was itself majority-government-owned. The agency formed a system of cross-ownerships and old-boy networks that permitted it to capture the advertising business of several companies in such state-controlled industries as banking and insurance without engendering outright conflicts of interest. Early clients included Air France, Berlitz, and LOreal. By the late 1970s, Univas annual billings totaled an estimated US$230 million.

Around this time, the firm made its first acquisitive move toward the United States, a market that had long been regarded as a key to internationalization. These efforts, though, resulted in failed affiliations with Needham, Harper & Steers and Kelly Nason, Inc. The latter was characterized as a fiasco: Kelly Nason literally disintegrate[d] within a year of the purchase, and Univas lost an estimated US$2.5 million on the deal.

Although Univas billings continued to multiply to the point that it ranked in the global top twenty by 1980, the agency network was widely denigrated as a bureaucratic bastion of perks, privileges, and corruption. Corporate leadership changed with each federal administration, and individual agencies within the system were said by Debra Goldman of ADWEEK to be filled with faceless civil servants and sons of clients who got their jobs through the elite who-you-know circuit.

In the late 1960s and early 1970s, several independent agencies were founded as alternatives to the government ad regime. Roux Séguéla Cayzac & Goudard was one of these upstarts, created in 1972 under the creative leadership of Jacques Séguéla. Advertising was Séguélas third career; he had previously tried pharmacy and journalism, then turned to media in his thirties. Under this mercurial leader, RSCG quickly earned a reputation for brash, unfettered creativity. One of the agencys first ads featured an unauthorized image of then-French President Georges Pompidou. Although all copies of the piece were ordered to be confiscated, the resulting publicity more than made up for the loss. A groundbreaking campaign for automaker Citroen won several awards for its use of slang, as opposed to official French. Within less than a decade of its inception, RSCGs estimated US$80.5 million in annual billings ranked it among Frances top three advertising houses.

Séguéla and his partners created their independent agency as a foil to the government-owned Havas/Univas. Ironically, the agency made its name in political advertising. In 1975 RSCG handled three concurrent, but unrelated, political campaigns. The apex of the companys work in this area came in 1981, when the firm was awarded responsibility for Socialist François Mitterrands campaign for the presidency. The campaigns theme, La Force Tranquille (Man of Tranquil Force), was given much credit for Mitterrands upset victory.

It appeared to many in the industry that RSCG, which was already known as Frances most creative and controversial agency, had found its own patron in the government, but when Mitterrand reportedly shunned Séguélas subsequent public relations plans, their relationship fell apart. RSCG resumed its contrarian position, and Séguéla ensured that it became one of the countrys most vocal opponents of government-sponsored advertising in general and Eurocom in particular.

Despite its rather poor reputation, Eurocoms expanding sphere of influence won it several major accounts. In 1982, for example, French automaker Peugeot awarded Eurocom virtually all its European business. This move was Europes largest account transfer to that date.

By the late 1980s, Eurocoms international network included Australie and Synergic in France, Ata Tonic in Italy, Ruiz-Nicoli in Madrid, and V und B II Warbargentur in Germany. In 1987 (the same year that the French government divested its stake in Havas) Eurocom joined two other major global advertising groupsAmericas Young & Rubicam and Japans Dentsuin a multi-cultural joint venture known as HDM Worldwide Direct. (The acronym indicated the enterprises primary investors, Havas Conseil, Dentsu, and Marstellar.) It was hoped that the cooperation between Asian, European, and American agencies would provide them with competitive advantages over their rivals. Although HDM soon ranked among the top ten agency networks in both Europe and Asia, by the end of the decade Eurocom had grown increasingly dissatisfied with what it perceived as an unequal partnership.

Alain de Pouzilhac, who had joined Eurocom in 1976, succeeded Bernard Brochand as president of the four-agency group in 1989. Described in a 1991 ADWEEK as fiercely competitive, he was the driving force behind Eurocoms transformation from a primarily French bureaucracy into a vital global competitor. Early 1990s acquisitions (which Marketing characterized as a merger orgy) increased international revenues from only one percent of Eurocoms total to 60 percent from 1985 to 1990. Late in 1990, Eurocom paid an estimated US$55 million for its partners equity in HDMs US$1.5 billion (annual billings) European operations. Double-digit annual increases in French advertising spending throughout the 1980s also helped boost Eurocoms status.

Meanwhile, Roux Séquéla Cayzac & Goudard also rode the tide of French industry growth, borrowing heavily to finance acquisitions that propelled it into the global top 15. But an advertising drought in the early 1990s stranded RSCG with more than Ffr 1 billion (US$200 million) in debt, and the company neared default. The firm lost Ffr 280 million in 1991 before selling out to arch-enemy Eurocom for Ffr 500 million. In a statement to Marketing magazines Dilip Subramanian, Séguéla brushed off two decades of outwardly vociferous rivalry as mere sport: one year you play for one club, the next year against it.

The new partners spent the next two years reconciling client and management conflicts before finalizing their merger in 1993. The union was mutually beneficial: Eurocom got a badly-needed influx of fresh creative talent and two new American agencies (as well as a US$100 million Procter & Gamble account), while RSCG got the financial backing it desperately needed. Four RSCG partners stayed on to take leading roles in the unified company. Alain Cayzac assumed the role of chairman of French operations, Jean-Michel Goudard became CEO of international operations, and Jacques Séguéla took worldwide creative responsibilities. Bernard Roux left the group to form his own agency with Christophe Lambert and Thierry Consigovy. De Pouzilhac, who became chairman of the new mega-agency, announced that the distinctly French group would prove a formidable opponent for American and Japanese firms. Indeed, the new advertising powerhouse boasted nearly twice as much in annual revenues as its closest Euro-competitor, Frances Publicis FCB.

Realizing that globalization necessitated establishing a foothold in the United States, the worlds largest advertising market, de Pouzilhac focused his attention on that country in the early 1990s. Eurocoms 1989 acquisition of Delia Femina, McNamee had fared only slightly better than its 1970s-era missteps. Agency namesake Jerry Delia Femina proved reluctant to put aside his desire to control the holding companys U.S. properties. The merger with RSCG had added two new American shopsTatham/RSCG and Messner, Vetere, Berger, Carey, Schmettererand therefore compounded difficulties with Delia Femina. After months of well-publicized and reportedly rancorous conflict, Euro RSCG bought out Delia Feminas contract for US$30 million in 1992. His agency was subsequently merged with Messner, Vetere, Berger, Carey, Schmetterer.

An industry observer with The Economist noted that, despite its advance in world rankings and expansionist efforts in the United States, Euro RSCGs extra-European revenues still amounted to less than one-third of gross income in 1992. In order to become more truly global, the agency began establishing offices in the Pacific Rim, which was expected to experience double-digit revenue growth in the 1990s. The group created or acquired offices in Australia, China, Hong Kong, Malaysia, Singapore, Taiwan, and Thailand.

Advertising industry legislation in the early 1990s also compelled Euro RSCGs efforts at international expansion. Loi Evin, a 1991 dictum that banned all tobacco and alcohol ads, was the first major strike. The truly painful loi Sapin, which regulated billing practices, went into effect in 1993. Sapin outlawed the sur-commissions, derisively called kickbacks by some, that many French ad agencies previously received from media companies. The new legislation mandated direct, precise client billing. Several trade journals denounced the rule, which had the effect of slashing admittedly generous profit margins. Layoffs and wage freezes erupted throughout the countrys ad houses. Euro RSCGs French staffing levels were reduced by more than 30 percent in 1993 and 1994.

A 1994 stock analysis by B. Lacordaire of the Thompson Financial Networks attributed Ffr 130 million of Euro RSCGs 1993-1994 Ffr 250 million revenue decline to the effects of the loi Sapin. Jean-Michel Goudard characterized the loi Sapin as a disaster to ADWEEK s Daniel Tilles, although he acknowledged in the same interview that France [had] been tarnished by the media practices of the past 20 years. Although a new governmental administration launched an investigation of the laws effects, the loi Sapin remained in effect in 1995.

The combination of recession, legislative constraints, and ongoing merger-related restructuring (including some clientconflict fallout) had slashed Euro RSCGs net revenues by 33 percent from 1992 to 1993. In an effort to compensate, the agency network issued Ffr 1 billion in bonds, Ffr 150 million of which were subscribed by Havas, thereby raising the latter companys stake in Euro RSCG to 38 percent. The proceeds were put toward reduction of Euro RSCGs billion-franc debt.

Notwithstanding Euro RSCGs difficulties in the mid-1990s, CEO Alain de Pouzilhac was confident that the year 2000 would mark the beginning of Europes ascendancy, and that his agency network was well-positioned for the new era. Euro RSCGs leader has set a goal of ranking among the worlds top five by the beginning of the next century. At least two industry analysts agreed with his estimation. Thomson Financial Networks analyst B. Lacordaire predicted a 29 percent increase in the companys net income for 1995 on the strength of cost-cutting measures. A separate analysis predicted income growth of 45 percent for 1994 and another 52 percent in 1995.

Principal Subsidiaries

Euro RSCG France (99%); Euro RSCG (Germany); V & B (Germany; 60%); Euro RSCG (Austria; 86%); Garbarski Euro RSCG (Belgium; 70%); Palmares (Belgium; 88%); Equator (Belgium; 87%); Euro RSCG Denmark; Euro RSCG (Spain; 63%); Vizeversa (Spain; 66%); Unitros (Spain; 51%); EWDB España (50%); Euro RSCG Finland (96%); Euro RSCG Athens (51%); HDM Hellas; Benjamens Van Doors Euro RSCG (Netherlands); Anema & Hageman (Netherlands; 85%); Euro RSCG Havasi (Hungary; 67%); Eurocom Advertising Italia; Equipe (Italy; 51%); BGS (Italy; 79%); RSCG Mezzano Constantini Mignani (Italy; 59%); Ata Tonic (Italy; 75%); Klem RSCG (Morocco; 50%); Euro RSCG (Norway; 75%); Euro RSCG (Poland; 60%); Euro RSCG Pub-licidade (Portugal; 71%); Euro RSCG (Czech Republic); Eve-link (United Kingdom); Eurscg Holding (Sweden); Euro RSCG (Sweden); Eurad (Switzerland; 51%); EWDB North America (United States); MVBMS (United States; 60.8%); Euro RSCG Holdings (United States); The Ball Partnership Investments (Bermuda); Euro RSCG Ball Partnership (Australia); Euro RSCG Ball Partnership (Hong Kong); Euro RSCG Ball Partnership (Singapore); Euro RSCG Ball Partnership (Malaysia); Euro RSCG Ball Partnership (Taiwan; 80%); Euro RSCG Ball Partnership (Thailand).

Further Reading

Burton, Patrick, Loi Sapins Threat, Marketing, March 25, 1993, p. 19.

Crumley, Bruce, Fiat Quits Euro RSCG, Advertising Age, October 21, 1991, pp. 1, 56.

Emmrich, Stuart, Alain de Pouzilhac: Eurocom Chairman Sets Acquisition Course for America, ADWEEK Eastern Edition, April 8, 1991, p. 16.

Eurover There, The Economist, July 4, 1992, pp. 58, 60.

Goldman, Debra, The French Connection, ADWEEK Eastern Edition, December 16, 1991, p. 18.

Hill, Philip, Jacques Séguéla is Alive and Well, Advertising Age, November 19, 1984, pp. 56, 60.

Lacordaire, B., Euro RSCG - Company Report, Thomson Financial Networks Inc., 1994.

Lafayette, Jon, HDM Doomed? Eurocom Nears Buyout, Merger, Advertising Age, November 12, 1990, pp. 1, 78.

McCormack, Kevin, Will Eurocom Divorce Partners in HDM Venture? ADWEEK Eastern Edition, September 17, 1990, p. 1.

Pfaff, Carolyn, Vuitton Taps Séguéla for Forgery Fight, Advertising Age, April 23, 1979, p. 84.

_____, Peugeot Puts All at Univas, Advertising Age, June 14, 1982, pp. 1, 68.

Pfaff, Carolyn, and Anika Mechalowska, New French Regime Shakes Up Marketers, Advertising Age, May 18, 1981, pp. 1, 113.

Subramanian, Dilip, The Ad Party is Over in Paris; Double-Digit Growth has Given Way to Sub-Inflation Rates, Marketing, December 9, 1991.

_____, Renegades Sell to Former Foe, Marketing, January 6, 1992, p. 18.

Tilles, Daniel, French Agency Heads Sound Off on Sapin; ADWEEK Eastern Edition, August 23, 1993, p. 12.

Wilson, Claire, Eurocom Unruffled by Sale, Advertising Age, May 25, 1987, p. 48.

April D. Gasbarre