Irish PR firms fare well as big players seek entry

The sale of Dublin public relations agency Gallagher & Kelly for a minimum of £7.1 million (€9 million) to international communications group Cordiant means five of the top six PR agencies here are now part of international networks. Not that there is a league table of agencies - the PR industry is, ironically, highly secretive.

While client lists are available, turnover is not. Even if it were, the nature of the business, where third-party costs are usually large, means actual profit would be difficult to estimate.

It is generally assumed that the top agencies out of more than 40 in the market are Drurys, Murrays, Edelman, Wilson Hartnell PR, Gallagher & Kelly and Fleishman-Hillard Saunders. Only Murrays is now Irish owned. The reason international networks have spent more than £22 million in the past year buying footholds here is, according to industry sources, bound up with the strength of the economy.

"Ireland is seen as an international hub and international players feel they have to be here, especially if they have big technology clients," says an industry source.

PR agencies with a strong public affairs component are ripe for takeover.

Technology or manufacturing clients planning on a greenfield site location here, for example, are likely to want a local agency with strong lobbying skills and good business and political contacts. From a purely business point of view, buying a large Dublin-based PR agency usually means buying a profitable business.

Agencies tend to operate from a margin of 15 per cent upwards.

Some niche operators work off even higher margins - of up to 30 per cent.

Irish advertising agencies have also been the subject of takeovers and international buyouts in the recent past but, for them, a buyout usually means the acquisition of new business as brands realign across the network.

Irish International advertising agency, for example, is set to work on the Guinness account thanks to its parent company, BBDO in London, winning the global account.

It does not work that way for PR firms, with one PR executive saying the flow of business can go the opposite way after a buyout. "Irish firms increasingly want to get into international markets so we often bring business to our network instead of it coming the other way," he said.

Another said that, for an Irish agency, the benefit of being part of a network is that it can "cherry pick" incoming business and use the international network to benefit existing Irish clients.

Clearly only those involved know how Cordiant and Gallagher & Kelly set the price but in the past the industry had a rule of thumb: PR firms were worth around two and a half times the annual turnover - or five times the profit.

It is not clear whether that operated in this most recent buyout.

The deal also comes with an "earn out" clause under which its Irish directors could, if performance targets are reached, earn almost another £5 million.

As one executive who works for an international network says: "These international companies have deep pockets, but, despite what it might seem, they don't throw money around."