The Thomson Corporation is, at least technically, Canadian. So it is, at least metrically, a 363 kilogram gorilla in the global market for IR services. And it keeps gaining mass. Most recently, at the end of September, the information and publishing empire acquired the investor relations division of Georgeson & Co in what was a surprising coup for its financial services business.
The deal is one of many shaking the IR industry. Also this fall, Citigate’s parent, Incepta, snapped up Dewe Rogerson for £24.4 mn, while Shareholder Communications Corp acquired Kissel-Blake, a venerable proxy solicitation and stockwatch boutique. For Thomson, this latest deal follows its April purchase of Technimetrics from Knight-Ridder for a cool $125 mn. The Georgeson IR sale, leaving the firm focused on proxy solicitation and corporate governance advising, is thought to have cost Thomson some $30 mn.
‘The pace of change and globalization puts pressure on service companies to provide a broader, deeper range of services,’ explains Nico Rogerson, co-founder of Dewe Rogerson. ‘Neither Dewe Rogerson nor Citigate on their own were capable of coping with those pressures.’
Tech drive
In some ways, the impetus behind this IR industry consolidation mirrors the forces at work in the global financial services arena. ‘Where there’s huge technology spending, bigger is more efficient,’ remarks Richard Mead, managing director of the Jordan Edmiston Group, Georgeson’s investment bank for the deal.
‘We were very reluctant to split off our IR business,’ admits John Wilcox, chairman of Georgeson. ‘But it also became clear that we could not provide the data, information systems and deep pockets that Thomson could to make our IR business grow. Frankly, if we hadn’t done this, I’m not sure we would have been able to compete.’
‘SCC brings us the wherewithal to keep up with the technology,’ says William Willis, Snr, Kissel-Blake’s president. Facing a whale of a stockwatch competitor – Thomson swallowed CDA, Chicago’s Grable Bloom and DF King’s old stockwatch division, in addition to Technimetrics – played a part in Willis’s decision to seek a merger.
SCC, like Thomson, is busy empire building. Indeed, it came near doing a deal with Georgeson itself earlier this year. Last year it acquired the Proxy Solicitation Company in Toronto, which now meshes well with Kissel-Blake’s Canadian stockwatch experience. Both acquirees faced the challenge of keeping up with technology. ‘We’ve been way ahead of the curve in technology and infrastructure, so rounding out our product line both in Canada and the States is a prudent way to go,’ says Sam Chandoha, SCC’s chief operating officer.
Meanwhile Kissel-Blake gets an entree to the rapidly growing business of mutual fund proxies, where SCC is a leader. ‘It’s becoming a fertile field in the area of hostilities,’ says Willis. ‘Closed-end funds selling at a deep discount are great temptation for a raider, and we bring the expertise on how to survive in the takeover arena.’
Golden years
There are more pedestrian reasons for selling. At 64, Bill Willis is beginning to think retirement, as is Roddy Dewe and the other founding fathers of Dewe Rogerson. ‘The founding generation are all of a certain age,’ a Dewe Rogerson insider tactfully says.
In Georgeson’s corner, a key motivation was to shake off its 50 percent owner, USF&G, the Baltimore insurance company that backed Georgeson’s 1992 management buy-out. ‘There are lots of advantages to being 100 percent owned by employees,’ says Wilcox (although a small percentage of the shares have in fact gone with some of the senior Georgeson IR team to Thomson). ‘It gives us greater maneuverability, we can go out and look for additional capital if we need it, and it gives employees motivation. We can look at a variety of alternatives now without having to confer with a 50 percent owner.’
For their part, Dewe Rogerson staff are ‘very excited’ about the £5.3 mn worth of Incepta shares allocated to them. ‘We’re now working for a public company that takes care not only of its shareholders but its employees as well,’ says Felicia Vonella, Dewe’s head of IR in New York. ‘It might be an additional tool in attracting senior talent.’
Stemming the tide
The migration of very senior talent marks all three deals: 50 of Georgeson IR’s 83 employees are senior consultants; SCC is adding 30 seasoned Kissel-Blake experts to its 350-strong infrastructure and systems driven army; and Citigate acquires very experienced IR advisors in Dewe Rogerson.
Further growth is imminent. Thomson IR has 45 openings, and Bill Willis predicts SCC will reach 600 employees by spring 1999. But where there’s talent there’s temperament. Keeping employees, not to mention clients, must be a challenge in all of the deals. By coincidence, Dewe’s New York president, Elizabeth Krupnick, departed weeks before the sale. Senior Georgeson consultants Mark Bonnacci and John Shave have gone to National PR New York, which is headed by former Hill & Knowlton VP Edmund Belak.
As in any fiercely competitive industry, stockwatch and shareholder ID have migratory and sometimes bitter client/ employee/information sources. Some staff have seen most of the insides of CDA, Georgeson, Technimetrics, DF King and the Carson Group. In the race to close the Thomson/Georgeson deal, staff were told weeks before clients. Word leaked out and a major competitor began talking to Georgeson’s IR clients about it being purchased by ‘CDA’, a Thomson brand that no longer exists.
In the view of Ernie Sando, Georgeson’s managing director heading the transition team, ‘In a situation like this the cultural clash is what can put it on the skids. But I have never seen a group get along as well as this.’ Having Tom Clarke, president of Thomson Investor Relations, handling the deal helped: the former head of Technimetrics had lived through being acquired by Thomson and is still smiling.
The Thomson brand, for that matter, was invisible in the IR market until late. Various acquisitions by the publishing empire have yielded an array of companies serving both corporations and investors. First Call, Institutional Shareholder Services, Grable Bloom and CDA, for example. It all began to change when David Flaschen became CEO of Thomson Financial Services in March 1997 and suggested vertical markets. ‘Thomson Investor Relations is the first attempt to look at a vertical market,’ says Clarke. ‘The next step will be to look at the institutional market and do the same thing.’
Conflict question
The vertical strategy faces some obstacles. It could mean splitting up First Call, for instance, while keeping the back end of the business intact. And ISS may be a thorn in Thomson’s side: serving mainly institutional investors, the proxy advisor is seen by most public companies as the enemy. That could pose a conflict if Thomson wants to acquire a proxy solicitor, such as the new skimmed down Georgeson. ‘We would look at that possibility. But ISS right now and Georgeson’s proxy wouldn’t co-exist,’ says Clarke.
‘Who knows?’ muses Wilcox. ‘Maybe within a few more years, Georgeson will end up entirely as part of Thomson.’ For now, the information giant will content itself with an investment in the new-look Georgeson in the form of a convertible debenture.
On the client side, the question is whether bigger really is better. Says Clarke: ‘Our strategic vision is to be full-service to any public company in any of its communication efforts. We’re going to stay acquisitive in areas we don’t currently have.’ He says one area still lacking is financial media PR. Another area of growth is overseas, building on Thomson’s existing business in 42 countries.
From the sidelines, the Carson Group’s David Geliebter observes: ‘Being everything to everybody may work for supermarkets. But in our business, it’s a matter of offering the best services you possibly can and being a niche player. By buying services from different people, you bring together the best resources.’
But Thomson insists benefits should still reach clients. ‘We’ll look at economies of scale, such as with web delivery which saves cost,’ says Clarke. ‘And it will be a broader array of services – we can make a compelling package for a public company.’
Dewe Rogerson co-founder Anthony Carlisle, who is joining the Incepta Group board, says his firm recognized the need to expand its geographic presence and service range as long as 18 months ago. ‘And as the business grows increasingly international, we needed to further invest in group infrastructure. That argued for an increase in scale to leverage our investments across a bigger spectrum.’ Citigate for its part was founded on the concept of integrated services – corporate communications, corporate identity, PR and IR, says Jim Gray, North American president of Citigate Communications. Acquiring Dewe Rogerson ‘is just another step toward one-stop shopping.’
Choice, then, may be the ultimate question for IROs. Not the choice over a menu of different services – a menu growing with each new deal in the industry. Simply the choice of different service providers, a choice which shrinks with each deal.
