The last two weeks have been momentous in terms of consolidation:
Oracle has bought Peoplesoft – for twice its original offer
Symantec is making a bid for Veritas – for a mere $13bn
Sprint is merging with Nextel – $35bn – this really is a biggie
Electronic Arts has bought a chunk of Ubisoft just today – currently deemed a hostile move
I was speaking to a security client last week about consolidation. With hardware giants like NetScreen being bought this year, and consolidation hitting both the software and telecoms sector, it seems no-one is safe. The big question is obviously – who’s next?
Enterprise software firms must be wondering – rumors abound about BEA Systems ($3.54bn), E.piphany ($329.5m) and Siebel ($4.94bn). But CRM isn’t the only area – what about Business Intelligence? Any of the leading players like Business Objects ($2.22bn), Cognos ($3.83bn) or Hyperion ($1.69bn) could be bought or the buyer. And by the way, you could buy all of these bar Siebel for the size of the Veritas deal, just to put it into context.
What does this mean for PR pros? Well, certainly working on these campaigns is a thrilling ride. But for agency’s with a Veritas as the marquee client (in this case Edelman), it’s a worrying time. My agency has always had a policy of not having more than 5% of revenues tied up in one client. Over-concentration on one client is a weakness. You can literally be loved-to-death by the client who sucks up the best talent, and then puts the agency in a precarious position if/when it decides to move on (sometimes for reasons beyond its control).
But it’s also a challenge for the client. Realistically, does a client which represents 30% of an agency’s revenue get independent advice? Or do they just get what they want? I recently spoke to one leading tech vendor who is afraid to re-pitch his business since he knows it will lead to job losses at the agency. He’s not happy but doesn’t want to inflict that on a partner he’s worked with for so long. So he’s enduring the marriage through fear of the pain of divorce.
To reach equilibrium, I expect this augurs further consolidation in the PR industry. Godzilla has to fight King Kong or it’s not an even match. I’m not sure that’s good for the quality of the PR though – far from an ideas factory, such large agencies can become press release factories. They attract the wrong kind of staff – ones who want to join because the company is big, and therefore it must be safe and offer a solid career. Question is, is it big enough? Guess we’ll have to ask the guys at Veritas.