Nobody's Perfect
Page 27
For all their apparent good fit, the two agencies dropped the subject in mid-year, distracted, perhaps, by other possibilities.
In December 1985, John lunched at the Helmsley Hotel with his BBDO counterpart, international head Willi Schalk. They chatted about their children’s schools and other domestic topics. Then Schalk told John he’d been hearing “all the rumors going around about mergers—everybody’s talking to everybody else.” If Doyle Dane Bernbach was serious about a merger, BBDO would like to talk “before you do anything else.” Schalk didn’t tell John that BBDO was already talking to Needham, nor did he know that DDB and Needham had talked.
John reported the exchange to Loughrane. They hauled out the Redbook, listing agency clients, and found massive conflicts between BBDO’s and theirs. The only possible arrangement would be a holding company, under which the two agencies would operate separately, independent of one another.
An alluring concept. Doyle Dane Bernbach intact, but under the wing of a strong parent with deep pockets and managerial skills. And so, in mid-January of 1986, when business resumed on Madison Avenue after the annual indulgences of the holiday season, John lunched with Schalk again, expressing the hope that talks could begin in earnest. Chairman Roy Grace hadn’t yet announced his departure, but he was out of the loop on this and every other possible structural change.
* * *
Details of the talks that followed are not part of my story. Suffice to say the power belonged entirely to BBDO, which toyed alternately with thoughts of doing a deal with Needham and with Doyle Dane Bernbach. Neither of the anxious-to-be-acquired agencies suspected it had competition for BBDO’s hand. Willi Schalk gets credit for sparing either rejection, by proposing a union of the two. Happily, the two fell into each other’s arms, relieved not to be left behind to their own clouded destinies.
Thus, the so-called “big bang” mega-merger of the three agencies and their holdings. The agreement was announced on April 28, 1986. “Awesome,” Advertising Age editorialized, “Positively awesome.” The participants “have made advertising history by simultaneously combining, not two, but three brilliantly creative organizations under one corporate roof . . . a watershed moment in advertising history.” The press, like Doyle Dane Bernbach’s board before its last meeting, still assumed all was well with the agency, and so perceived the three-way merger as a “positive, cocky approach bespeak[ing] an admirable go-for-it resolve to be No. l.”
The parent company would be called Omnicom. It would oversee three distinct companies. BBDO, the source of its strength. DDB Needham Worldwide, the merger of two troubled agencies. And Diversified Agency Services, a catch-all of the many specialized and regional agencies and subsidiaries collected over the years by the three major players.
In a stroke they would form the largest agency group in the world. Their supremacy lasted for two whole weeks. Then the Saatchis out-banged them by purchasing Ted Bates Worldwide, thus forming an even bigger agency group, and striking terror into the hearts of agency people everywhere.
* * *
Doyle Dane Bernbach’s board found the mega-merger proposal considerably less than awesome when it came before them on the nights of April 24 and 25. Members were enraged when Loughrane and Pfundstein presented a torrent of data, leading to the conclusion that the mega-merger was essential because the agency was “dead in the water.”
Mac Dane pointed to prior forecasts of a bright outlook for the DDB Group. “I was surprised,” he said later, “at the quick turnaround that we couldn’t make it on our own.”
“It wasn’t a merger proposal,” said Ned Doyle. “It was a buy-out.” He’d always believed the agency could be turned around by the right person, and he’d believed that Loughrane was the right person. Loughrane broke his heart. In Doyle’s words, “He was a complete disappointment. He never did anything.”
Board member Neil Austrian, always a proponent of combinations, agreed with Loughrane on the strategic need to merge, but faulted his failure to keep the board informed until there were no options. He believed that, “had the board some other options, this deal never would have happened.”
Austrian, the numbers wizard, stormed against the proposal’s valuation of DDB shares. Directors who had barely been civil to him since the Saatchi episode of 1984 now rallied ’round him. At the end of an emotionally exhausting meeting on April 24, the board followed Austrian’s advice and rejected the mega-merger, unless and until it provided a higher exchange ratio on DDB shares.
(The Saatchis’ intelligence network picked up on the secret goings-on, and overnight the British takeover masters sketched out an offer of $30 per share for the stock. The offer contained so many contingencies that the board rejected it out of hand.)
Through the night of April 24, bankers and lawyers crunched numbers, and came up with a slightly-improved ratio for DDB shareholders. “Not as good as it should have been,” commented Austrian later. “We sold the business for no premium. For no premium. We sold it.”
With heavy hearts and feelings of utter powerlessness, the shrimp board voted to approve the submergence of the legendary Doyle Dane Bernbach into the unknown entity of DDB Needham Worldwide.
* * *
The resentment felt by the directors toward this unexpected denouement turned into near-apoplexy at a board meeting in May 1986, called to wrap up the second round of the Long Term Incentive Awards before the “change in control.” (The actual mega-merger awaited approval by shareholders of the three agencies at meetings scheduled for late August.) Loughrane and Phundstein claimed 100 percent cash on their performance units. They recommended zero for the other participants. Why? Because only Corporate’s profits were higher than the base year set in the plan. The payout would give Loughrane $900,000 and Pfundstein $600,000.
“Nobody else was getting a dime,” Joe Daly remembered. “Now how in hell can Corporate make bonuses when none of the divisions made their numbers?” The answer was a technicality. The base year happened to include a write-off of $3 million in accounts receivable on the Victor Technology business, “so no matter what you did, you’re going to make money corporately,” explained Daly.
Austrian reminded Loughrane and Pfundstein that they’d received full corporate bonuses on the last round, when the board waived the write-off while it voted for the payout. “Then Victor didn’t count,” shouted Austrian. “Now you say it does count. You can’t have it both ways!”
The directors, who had been roused to fury against Austrian two years earlier, now boiled with anger against his chief opponents of that time. Those men had assured them they could make it work, and had instead “sold them out.” They voted with Austrian to reject the second-round LTIA payouts to Loughrane and Pfundstein.
Whereupon the two men threatened to bring immediate suit, an action certain to torpedo the mega-merger. Through a night of heated telephone calls, Doyle Dane Bernbach’s wise old advisers—lawyer Josh Levine and accountant David Zack—weighed in on the side of pacification. Tempers cooled. The possible consequences of a lawsuit at this stage were too awful to unloose. The board met again on the following day and approved the payouts to Loughrane and Pfundstein.
But the episode left, in Daly’s words, “such a terrible taste,” that the two men became pariahs on the executive floor. They were cut out of the agency’s memo stream, excluded from meetings, isolated from daily events. And on the day after shareholders approved the mega-merger, Loughrane and Pfundstein were stripped of their building keys and ID passes by DDB’s office services manager and a security guard.
There had been bad endings a-plenty in the Doyle Dane Bernbach management saga, but this one took the prize.
* * *
The upbeat tone of the mega-merger announcement on April 28 only briefly diverted DDBers from fear for their jobs. Downsizing continued through the summer, shrinking the payroll from 750 to 600, as prelude to the upcoming shareholder approval meetings. Management of the merged agency must be allowed to begin withou
t blood on its hands.
Anger built among DDBers with the growing perception that they had been abandoned. Whose agency would this be, anyway? Where were their leaders? Loughrane and Pfundstein had “sold them out,” taken money from the LTIAs, and won five-year contracts with Omnicom to manage the catch-all group, Diversified Agency Services, leaving DDBers to the mercies of strangers. Oh, sure, John Bernbach would play a major role in the merged agency, but few DDBers had even met the peripatetic international head.
Their new CEO would be Keith Reinhard, a 51-year-old Indiana Mennonite who was Needham’s CEO and creative star. Surely he’d bring his own style and his own trusted people. (DDBers, an irreverent lot, groaned when they read copies of the homiletic memos Reinhard wrote weekly to his staff. Compatible cultures? Hardly.) Whatever the long-term outcome, the agency would never again be theirs, would never again be Doyle Dane Bernbach.
Still, not one of the talented city kids nurtured by Bernbach had proved to be a strong creative leader. Was that happenstance? Might that in some subterranean way be the result of Bernbach’s inability to cede power? Whatever, this was the price.
* * *
Current and former employees filled most of the seats in the Time-Life auditorium on August 28, 1986, when Doyle Dane Bernbach shareholders met to vote on the mega-merger proposal. Tension and unhappiness were reflected in their faces. From the podium, the words came out formalistically—analytic, legalistic, financial, complete with charts and tables. Cut and dried and unsatisfying, until adjournment was called for, and an agency alumna asked if she might make a statement. Yes, of course.
Paula Green, the copywriter who had, among many other early DDB triumphs, created the Avis “We try harder” campaign with Helmut Krone, took a microphone and spoke spontaneously, from her heart.
“I come here out of love and honor and respect for the three great people who founded this agency, an agency that gave us courage, that put all of us on the way to our own ways, that allowed us to grow. I come here to celebrate them, and to hope that this new agency is in every way a reflection of Bill Bernbach, Ned Doyle, and Mac Dane . . . [and that] the traditions continue even though the name may change.”
The room erupted in loud applause. The moving message had restored humanity, and memories, and ideals. Maybe things would be okay after all.
* * *
Joe Daly was asked to speak at a gathering of the agency’s international managers and creative heads, soon after completion of the mega-merger.
“I’m the oldest guy here, and I’ve been in this joint for 37 years,” he began, “so you might like to know what I think about the merger.
“You’ve heard all the pro forma, how much money we’re going to make that we weren’t going to make, and you’ve also seen what a great geographic fit this is. And if you think that’s why we did the merger, I want to tell you one thing: Bullshit!s We did it to get Keith Reinhard into this job.”
The group cheered the truth of Daly’s words. He repeated them often in the months ahead, even as Needham people gained control over various departments, and more DDBers bit the dust. He re-phrased his statement, proudly boasting:
“We decimated an agency to get one guy.”
Daly, of course, meant that Doyle Dane Bernbach had decimated Needham Harper Worldwide.
Funny, it felt just the opposite to the troops and alumni of Doyle Dane Bernbach.
Epilogue
“Don’t let it be forgot/That once there was a spot/For one brief shining moment that/was known as Camelot . . .”—Alan Jay Lerner
“There’s an Irish song with a great line,”” mused senior VP John Curran, on the day that Doyle Dane Bernbach disappeared into DDB Needham Worldwide Inc. “`What’s won is won/what’s done is done/and what’s lost is lost and gone forever.’ The fucking company is dead!”
On that, there was universal agreement among DDBers. Whatever became of DDB Needham, their Doyle Dane Bernbach had vanished, leaving them with a profound and bitter sense of loss.
Keith Reinhard would later admit that he had “naively expected” DDBers to like the merger, to say, “What a great idea.” He had assumed they would gladly don T-shirts touting “DDB Needham: The New Creative Force.” But that kind of boosterism, like Reinhard’s folksy staff memos, was a total turn-off to hip DDBers, who touched up the lettering to read, “The New Creative Farce.”
The clash of New York irreverence and Midwest homespun reverberated for many months, confounding the forecasts of “cultural compatibility.” It would be mid-1988 before the turbulence moderated sufficiently for the New York office to win its first new client. (In contrast, the undiluted Needham Chicago office won new business galore.) It would be mid-1989 before the New York Times declared that “after three years of turmoil, [the DDB-Needham merger] is starting to pay off.”
By that time, many more DDBers had gone. Bob Pfundstein was gone too, from his high position at Omnicom’s Diversified Agency Services. Barry Loughrane would resign at the end of 1989, without comment. The two men who supposedly had “sold out” the agency had ended up with more of the swag, but little future in the company they helped make happen.
* * *
Every step along the way to mega-merger and a year or more beyond brought laments of “Bill Bernbach must be spinning in his grave.” The creative rivalries of Marvin Honig, Bob Levenson and Roy Grace. The inability of the post-Bernbach CEOs, Austrian and Loughrane, to pull the place together and get it moving again. The perception that “every man for himself” had become the dominant value. After the mega-merger, the worry that the merged agency might not survive the turmoil long enough to start winning new business.
John Bernbach never doubted. On top of the heap, he confidently predicted, from the day of the Big Bang, that in its new incarnation DDB would exist “in perpetuity.”
Meanwhile, Advertising Age, the bible of the industry, ran a striking four-page article titled “The Bernbach Fantasies,” in which Bill Bernbach was placed with John Keats, Ralph Waldo Emerson, Winston Churchill and Shakespeare.
“Bill’s been elevated to saint,” muttered his old art director, Bob Gage. “He’s up there, floating above us.”
So Bernbach had indeed pulled free of his agency’s reputation and soared into advertising history’s stratosphere. His family had the $20 million. His adored son John buzzed happily around the globe as president of the new agency, second only to the man the merger turned out to be about, Needham Harper’s creative star, Keith Reinhard. And the industry had seen that Doyle Dane Bernbach could not survive without Bill Bernbach.
Spin in his grave? What could have been more perfect?