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TMCNet:  Capstrat acquired by PR giant Ketchum [The News & Observer (Raleigh, N.C.)]

[January 09, 2013]

Capstrat acquired by PR giant Ketchum [The News & Observer (Raleigh, N.C.)]

(News & Observer (Raleigh, NC) Via Acquire Media NewsEdge) Jan. 09--Capstrat, one of the Triangle's largest communications firms, has been acquired by public relations giant Ketchum for an undisclosed sum.

The privately held Raleigh agency has been thriving -- it added 30 employees in 2012, giving it a total of 125 -- but co-founder and CEO Ken Eudy said prospective clients increasingly have been asking, "If we hire you, how are you going to support us in Singapore Or San Francisco " Joining New York-based Ketchum, which has operations in more than 70 countries, fills that bill, Eudy said.


"We will operate under the Capstrat brand," Eudy said. "Everybody stays in place, including me. In fact, I'm the only one who has a new boss." Capstrat also will remain in Raleigh.

"We respect brand equity," Ketchum CEO Rob Flaherty said in an interview. "In this case, Capstrat ... is kind of a super-regional" with strong name recognition. "So it's valuable, and I think it's important, for now anyway, for them to retain that identity." Eudy, who was the firm's majority owner, said the sales price is confidential but added that he would love to disclose it "because I'm proud of it." Capstrat was originally called Capital Strategies when it was formed in 1994 by Eudy and Steve Meehan, who is no longer with the firm. At the outset the agency focused on public relations and government affairs, including lobbying, but over the years it expanded into marketing and advertising.

Eudy has been a fixture on the state's political scene since he was a political writer for The Charlotte Observer in the 1970s. He later became executive director of the state Democratic Party, then ventured into lobbying.

Capstrat landed major state government contracts under recent Democratic administrations. In 2012, lobbyists from the company worked on behalf of clients such as Google, Lenovo and various education groups.

Eudy laughed when asked whether the Democratic Party's declining fortunes in Raleigh -- Pat McCrory is the first Republican governor since Jim Martin left office in 1993 -- figured into the decision to sell.

"Not at all," said Eudy. "In our public affairs group, we have more Republicans than Democrats, and we did before the election." Eudy declined to discuss how much of the agency's revenue comes from political work but said its public affairs group has a staff of 15, which amounts to 12 percent of Capstrat's personnel.

Ketchum, Flaherty said, has been beefing up its public affairs capabilities.

"I call it issues marketing," he said. "I don't think anything can be marketed now separate from the issues that swirl around it. Think about food: You're marketing that now in the context of obesity, in the context of health benefits -- or not.

"If you want to be a great marketing communications agency," Flaherty continued, "you have to be really savvy about public policy issues, too. And I think that's always been the model at Capstrat." Capstrat's clients include Duke Energy, Blue Cross and Blue Shield of North Carolina, Quintiles, the American Institute of Certified Public Accountants, and Deloitte Touche Tohmatsu.

Eudy said he couldn't disclose Capstrat's 2012 revenue, citing Ketchum's nondisclosure policy. Capstrat previously reported that its 2011 revenue totaled $14.2 million, up 20 percent from the previous year.

Reji Puthenveetil, president of Group Newhouse, a marketing and management consulting firm in Raleigh, said Capstrat's day-to-day interactions with its current clients shouldn't change in light of the sale.

"And they may have (access) to a greater level of services given the Omnicom ownership of Ketchum," he said.

New York-based Omnicom Group, a publicly traded advertising and public relations firm, posted $10.27 billion in revenue over the first nine months of last year, up 2.5 percent from a year earlier. Net income totaled $691.2 million during that span, up 1.5 percent.

Omnicom's other public relations firms include Fleishman-Hillard, which has about 20 employees in its Raleigh office, Porter Novelli and Cone Communications. Its ad agencies include DDB, BBDO and TWBA/Chiat/Day.

Ketchum, which PRWeek named Agency of the Year last year, has more than 2,500 employees in 73 offices worldwide. It doesn't disclose revenue, but PRWeek estimated the agency generated $400 million to $450 million worldwide in 2011, including $250 million to $300 million in the United States.

Rick French, CEO of Raleigh communications firm French/West/Vaughan, said the deal "further validates the importance of Raleigh as a major PR center." "I think it will be interesting to watch how it unfolds," French said. "I have no reason to believe that Ketchum won't be successful with its strategy." Some marriages between Triangle agencies and large, publicly traded holding companies have ended in divorce.

In 2008 the management of McKinney, by far the Triangle's largest ad agency, acquired the business from its corporate parent, global advertising firm Havas of Paris, saying it saw an upside in being independent. (But there's more to the story: Last year the Durham agency was acquired by South Korea-based Cheil Worldwide, a marketing and communications company with offices in 28 countries.) Also, in 2006 a group of managers at Howard, Merrell & Partners, backed by local investors, acquired the Raleigh advertising agency from its corporate parent, Interpublic Group of New York.

Staff writer John Frank contributed to this story.

Ranii: 919-829-4877 ___ (c)2013 The News & Observer (Raleigh, N.C.) Visit The News & Observer (Raleigh, N.C.) at www.newsobserver.com Distributed by MCT Information Services

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