At least one board member completely lost heart at that point. And since he was Paul Bernbach, executor of his father’s estate, the potential consequences were staggering.
Even before Austrian was off the premises, an explosion detonated that ruptured friendships forever.
* * *
Paul Bernbach had dutifully uttered the proper words to the press, after Bernbach’s death, about his father’s satisfaction with the management in place at the agency. In truth, Paul had some doubts then. Now he had none. It was time to shelter the Bernbach fortune from the vagaries of the company. He had a fiduciary, not to mention family, responsibility to his mother, his brother, their wives and ten children.
Bill Bernbach had never sold off agency stock to diversify, as had his partners. The Bernbach family held 16 percent of the company stock. A company that couldn’t seem to get itself straightened out. A company that could conceivably go straight down the pipes.
Paul had sat on the shrimp board now for a year-and-a-half. A lawyer by training, he constantly weighed the risks of hanging in, and worried about possible detrimental effects to the agency his father founded, of pulling out. Austrian’s resignation tipped the scale. Paul decided to sell the family’s holdings. He had a buyer. Saatchi & Saatchi.
* * *
“The Saatchis had been courting us for a long time,” Paul related, “even when my father was alive. They had come and talked to him, generally, but also with a view to doing some kind of combination.”
Saatchi executive Tim Bell was a close friend of John Bernbach’s, “and every time Dad came to London, I made sure that we either had a lunch or a meal or spent some time together, because Tim is a great talker and Dad was a great talker . . . they were very turned on by each other. At the same time, there were other conversations [with other DDB and S&S executives] going on. . . .”
Did Bill Bernbach have any interest in a deal with S&S?
John: “I think it’s fair to say he recognized the fact that they were very interesting. I certainly had a lot of respect for their success. His attitude about that and a lot of other things was always, ‘If you want to talk, I’m always willing to listen.’”
Paul: “Nothing happened then, but they never stopped being interested. After my father died, and I was left in control of close to a million shares, they saw the opportunity to get a foot in the door. They started talking right away, and they kept on pressing. They made many offers for the family stock.”
Paul “talked a lot” with Maurice and Charles Saatchi. Here, there, all over. In Europe, where Paul went often on business. In New York. “I met with Maurice here; he was always the one who came here. A lot of meetings with him. He was always pushing the idea of a merger as a natural. And remember, in England S&S is a terrific agency that does wonderful creative work. And that’s what mattered to them most, they always said. It was only after they bought Compton and Ted Bates that people started to say, ‘Right, tell me about it.’”
Paul understood the Saatchis wanted the family stock as leverage in talking to management about a deal. He didn’t want the family stock used as a crowbar, but he didn’t want to keep holding the shares either. “There was an incredible amount of bad stuff, disruptive stuff, happening at that time,” recalled Paul. Like his father a decade earlier, he wanted out.
One morning, before Neil Austrian had finished packing up at DDB, Paul called and said the Saatchis were going to be in his office in an hour; would Austrian come and meet with them? “Which I did,” said Austrian. After all, he’d “been talking with the Saatchis forever.”
Those talks included Morgan Stanley representatives for the Saatchis.
“During the time in Paul’s office, the Morgan Stanley representatives were trying to find out, Could they buy Paul’s block, and if so at what price, and what would it take to do a deal to buy Doyle Dane Bernbach? They were asking me questions personally, as someone who knew where the blocks of stock were and what the price would have to be. I certainly was not negotiating the deal. At least, I believed I wasn’t.”
Did that include opinions on which people the Saatchis ought to lock in?
“You bet,” responded Austrian. “Who were the key people, who do you have to keep and what do you have to pay them, and what options do they have, what long-term incentive awards they have, etc. etc.”
The storm broke two days into Loughrane’s CEOship, when he learned that Maurice Saatchi thought he had a deal. In addition to the howling rage of Loughrane and his financial chief, Bob Pfundstein, at this apparent attempt to sell the agency just as they took power, there were many legal problems. The agency’s lawyers weighed in at once, drafting a letter to all board members, informing them that only the CEO was empowered to discuss offers for the company; that the others had no legal right to negotiate the disposition of Doyle Dane Bernbach.
New waves of hurt, anger and disbelief had been set off by Austrian—this time among the directors rather than the staff. How could he, after a decade of trust and respect, do this to the agency as a final, lame duck act. (They forgot they’d lost faith in him months earlier.) For money, insisted Pfundstein. “He owned a nice block of the stock that had been given to him. [The April 1984 proxy showed Austrian owning 85,000 shares.] The Saatchis were offering something in the area of $30 a share when the price of the stock was $20, so he would have increased the value of his holdings by 50 percent.”
Maybe, but while Austrian reveled in the sport of deal-structuring, and delighted in the rewards of success, personal greed wasn’t part of his make-up. More likely, he couldn’t resist one last grand opportunity to fix what was breaking in the way he understood best. And, at the same time, to discharge a responsibility he felt to the Bernbach family, who saw their fortune imperiled.
The new leaders, Loughrane and Pfundstein, campaigned hard amongst board members against a Saatchi takeover, their basic theme being that “you can forever forget Doyle Dane Bernbach and what we stood for if you do a deal with the Saatchis.”
Charting the fever of hostility, the Saatchis pulled back, never putting their offer into writing.
Bitterness followed disbelief. Loughrane and Pfundstein stopped speaking to Austrian. Ned Doyle, a frequent Saturday visitor to the Austrian home in Old Greenwich, cut his ties to the Austrian family. Mac Dane felt a sad disillusionment.
“Even though Paul Bernbach may have talked with him about it,” Mac Dane said later, “Neil should have been smart enough to stay away from any deal. Here he is, just resigned from the company, and he is handling negotiations with somebody who wants to purchase the stock. Most of us were surprised that he would not withdraw from any discussions whatsoever.”
Dane and Doyle were dead against selling the agency, to the Saatchis or anyone. They talked privately with Loughrane and Pfundstein. “We said to them in effect,” Dane related, “’Look, have you guys confidence in your ability to run the place and that it’s in good shape? If so, we’re willing to support you.’ They in effect both expressed confidence that whatever the problems were, they could handle them. They agreed with us that we ought to forge our own destiny.”
Could the agency afford to buy the Bernbach family shares? Dane and Doyle asked the two men. “Because if the Bernbach estate couldn’t sell to the Saatchis, there had to be another purchaser, and the only way we could maintain control would be for us to buy the stock.”
The corporation did, taking on a brutal debt to pay the Bernbachs $22.35 per share for their 914,910 shares—some $20 million.
Paul Bernbach said later that selling back to the company rather than to the Saatchis “cost the family an amount in the seven figures.” The family “went out of its way to be loyal to the management, and not put them in a difficult position.”
Pfundstein, still smarting, recalled recommending the buy-back to the board “to stop these kids from running around, constantly worrying about how much the money they inherited would be worth a year from now.” He had been, he believed, “extraordinarily fair
to the family—I could have let Paul sit there and stew with that stock for a long, long time. The Saatchis in no way would have bought the stock unless they knew they could get control of the company on a friendly basis.”
Austrian disputed this, citing the premium value of a controlled block of stock.
Not that the fine points of the controversy matter now, only that they long remained contentious among the principals.
* * *
For all the Sturm und Drang, the board didn’t ask Austrian to resign as a director. “I think,” said Dane, “the feeling was, why upset things? There are enough changes that are going on right now, and if Neil is willing to stay on, let’s keep him on.”
Keeping him on worked. The press didn’t get wind of the episode. But the bitterness lingered, long after the melodramatic ending of the meteoric—upward and downward—Austrian decade.
Account Gains and Losses, 1985 to the date of the mega-merger announcement, April 4, 1986
In:
Nabisco
Out:
Brown & Williamson (resigned)
Celanese
O.M. Scott
Sylvania
26
Dead in the Water
“An advertising company is made up of a lot of creative prima donnas.” —David L. Yunick, director, The JWT Group
Now Bill Bernbach’s old corner office belonged to Barry Loughrane. Often, looking out on the spires of St. Patrick’s Cathedral, Loughrane pondered the Gothic complexities within Doyle Dane Bernbach’s hallowed walls. What had Bernbach thought as he sat here, aware of approaching death, yet attending not at all to the matter of a creative successor?
Loughrane remembered times past, when he’d talked to Joe Daly about planning for his succession. “‘Joe,’ you say, ‘what happens if you get hit by a truck?’ And Joe says, ‘No truck is going to hit me.’ There is no answer to that,” shrugged Loughrane.
But when a truck roared down the narrow alleyway, straight at Bernbach, he still would not call out a name to the managers of his multi-national, billion-dollar-plus agency.
“Maybe,” mused Loughrane, “Bernbach should have said, ‘This is what I want, and this is how I see the future of the agency, and I see Bob Levenson doing it’ . . . or whoever. It wouldn’t have mattered what he said. The point is there would have been something. This place was rudderless. Neil came up out of Chief Financial Officer. He put a lot of points on the map, which was wonderful, but he created a much bigger monster. Because the core wasn’t put back in order. And now all of a sudden, several years later, instead of having a five-hundred-million-dollar large boutique, you have a billion-and-a-half-dollar monster.”
The core, at Doyle Dane Bernbach, had always meant its creative leadership. Loughrane was now stuck with the problem that Bernbach had willfully ignored.
* * *
Loughrane hadn’t even warmed up the CEO seat when he was hit with the loss of Polaroid’s U.S. consumer advertising—the client’s 30th anniversary present to its agency partner. The blow, long expected, nonetheless hardened the sense of hopelessness induced by the Miller Beer affair.
DDBers had never doubted that, given a shot at a major beer or soft-drink account, they could out-create anything on the air. When the opportunity finally came, all the talent in the place had fallen short.
Miller shook their faith in the future. Polaroid was Doyle Dane Bernbach’s history. The agency’s growth, its power structure and its psyche were interwoven with Polaroid. To lose the biggest piece of Polaroid diminished the proud past.
Both companies had been the darlings of Wall Street, Main Street and Madison Avenue for their innovative work and high principles. In the ’70s, both lost the aura of infallibility they’d acquired in the exuberant years of creative and technological discovery. Polaroid shares had tumbled from $149 to $14; DDB’s from $51 to $9.
Polaroid’s troubles began in 1972, when the company brought out its SX-70 camera. Analysts criticized the camera as too expensive and difficult to operate. In turn, Polaroid criticized DDB’s introductory commercials. The campaign made news—the great Lawrence Olivier in his first role as a product spokesman. Impressive, dignified—and unaffecting. Olivier demonstrated the camera with photographs of inanimate objects such as flowers. Nothing for the heart here.
“These people are tired,” Polaroid’s inventor, Dr. Land, said to Ted Voss, head of advertising. Pressure built on Voss to “get rid of DDB.” Instead, Voss released steam by adding a second agency, Needham, Harper Worldwide, for high-end cameras. Needham’s creative star, Keith Reinhard, did such brilliant work that Voss urged DDB, for its own sake, to hire Reinhard as “a second creative director” on Polaroid. How differently the scenario might have played out had DDB heeded the suggestion.
But the second half of the decade were good years for Doyle Dane Bernbach and Polaroid. Under Neil Austrian’s leadership, DDB acquired an admirable roster of agencies, in countries where Polaroid wanted servicing, gaining stature and vitality for itself in the process. “We felt we were financing that expansion,” said Voss, “but we did not mind, because it gave us access to the best.”
Meanwhile, Polaroid met Kodak’s challenge in the instant photography market with a new generation of easy-to-use cameras. And DDB’s Mariette Hartley-James Garner OneStep campaign, by Bob Gage and Jack Dillon, captivated audiences, swept the awards shows, and won grand prize for the most sales-effective campaign of the period.
The ’80s brought new troubles to both companies. At DDB, the divisiveness of the Paulson period and the death of Bernbach. At Polaroid, the erosion of the instant photography market by easy-to-operate 35mm cameras and one-hour film development stores. Polaroid cut staff and offered generous packages for voluntary departures. Some of its best people took the money and went to new jobs elsewhere. The marketing people who’d worked with DDB left in 1982. Sales people moved into marketing. A package goods man from Colgate-Palmolive came in. The free-wheeling, intuitive judgments of the high-flying years were gone. Now Polaroid tested commercials until their juices ran out, and still couldn’t make decisions.
Package goods mentality—the agency’s nemesis—on its paradigm account!
The people who’d moved from sales to marketing said they didn’t want to see any more of Joe Daly. “That’s the end,” Ned Doyle told Neil Austrian at the time, in1983. “Beat ’em to the punch by resigning.” Instead, Austrian determined to save the account, and flew almost weekly to Cambridge, Mass. But Doyle proved right.
“Joe Daly abused the lower level of Polaroid for years,” Doyle said later. “When they rose, Daly—and the agency—had it.” The sales people “had never liked Joe,” Voss confirmed. “They never understood what he could do, and they disliked what they saw of him at meetings.”
They didn’t like his unrestrained drinking and blonde-chasing at their sales meetings and conferences. They didn’t enjoy hearing him crow about winning thousands of dollars at the track, betting on and racing his horses. Jim Heekin used to caution Daly about the insensitivity of bragging about big winnings to lower-level, low-paid client people. Daly did not alter his ways.
Dazzlingly free of self-doubt, Daly never stopped believing that the Polaroid loss was entirely due to Austrian’s “talking me, and everyone else, into taking me off the account. I’ll never forgive the guy for that,” said Daly, soon after the denouement, the mega-merger of 1986.
But by then, Daly, in his late ‘60s, could look back on 30 years of power secured by his control of the Polaroid account. He had much to look forward to, as well. He would serve as a director of the new corporate parent, Omnicom. And, in the spreading CEO fashion, he would garner a trophy wife, marrying a beautiful young airline stewardess. No wonder he titled his memoirs, published by a vanity house, “Luck Is My Lady.”
Ned Doyle would die believing Daly’s luck was Doyle Dane Bernbach’s misfortune.
* * *
Two postscripts to the saga:
¨Ted Voss
praised Daly for having had “the power to get what Polaroid wanted” from the agency. But, he added, he and Peter Wensberg, the company’s brilliant VP-marketing in the glory days, “give more credit to Bob Gage than to Joe for the great work the agency did for Polaroid.”
¨ Polaroid pulled the rest of its billings out of the agency worldwide (16 of DDB’s foreign offices handled the account) in summer of 1985, further depressing earnings, and adding to an agency-wide sense of resignation that the end was near.
* * *
The agency’s New York office workforce shrank by 198 jobs in 1984, down to eight hundred plus, from more than a thousand at the end of 1983. Downsizing on that scale hadn’t happened since Austrian and Tom Gallagher mopped up after the disasters of the early ’70s. The troops had long since regained their old faith that Madison Avenue’s well-known revolving door didn’t operate at DDB, that the agency kept people on through hard times, that those who had served it well were secure.
Austrian reinforced that faith by keeping people on after major account losses in the early ’80s. Loughrane and his chief financial man, Bob Pfundstein, inherited the draining expenses of Austrian’s corporate good-heartedness. They mandated cuts, needing to improve the balance sheets—and, they argued, to improve morale among a workforce with insufficient work to fill each day. Idleness bred fear. Busy people were less likely to feel vulnerable.
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