Post & Partners could be a good fit for Canadian ad giant
After years of singing and dancing, Cossette Communications Group executives are heading to Broadway. Canada's largest ad agency yesterday announced the acquisition New York-City based Post & Partners for US $7.5 million in cash and shares, plus future performance-based payments during the next four years.
The deal sets in motion an expansion strategy announced by Cossette chairman Claude Lessard more than two years ago, which led to a $44.5 million initial public offering in June 1999, to finance acquisitions south-of-the border.
Since then, there has been nothing but talk, as Cossette executives increasingly fended off questions from analysts and the press about when these U.S. acquisitions would come.
Cossette did take some minor steps with the acquisition of two small Canadian firms, Koo Creative and Pulse Marketing -- and a partnership with interactive ad agency Proximi-T, but for the most part, the lion's share of the IPO money has remained untouched.
"It takes time to find the right partners and the right people for this kind of deal," said François Duffar, vice-chairman of Cossette, in a telephone interview during a limousine ride to La Guardia Airport, after yesterday's New York announcement. "It's a big move for our company, and we were not going to be rushed."
Why New York City? "New York is the center of the U.S. advertising world, and coming from Quebec City we were very conscious of its symbolic importance," said Duffar. "It's a long road from Quebec City to New York, and this move gives us instant credibility in the U.S. market."
The New York operation will be renamed Cossette Post. Since Cossette's Canadian operation and 1,000 employees are highly decentralized, what is now its U.S. division's 70 employees and local management are expected to remain largely intact.
Post & Partners had gross income of $US10.8 million for the fiscal year ended December 31, 2001, compared to $CDN 109.9 million, for Cossette for the year ended September 30, 2001. That means the deal will considerably boost Cossette's revenues. According to company officials the company's earnings per share should also increase both from an earnings and from a cash flow perspective.
The deal is a big step for Cossette. Although the U.S. market is huge, the American consumer is a tough nut to crack, and the graveyards are filled with the bodies of companies that tried to duplicate their Canadian success south of the border.
However a quick glance reveals a couple of items that make this transaction a good fit. For one, Post & Partners' client list includes a number of financial services companies such as Phoenix Life Insurance, Citibank Student Loan Corporation and most importantly: TD Waterhouse, for whom it is agency of record for the entire U.S. It's an area that Cossette - which has long tried to land a big-five, cross-country bank advertising account -- is weak in.
But in addition to the large account base, Cossette is also getting some heavy U.S. managerial talent, notably Peter Post, Post & Partners', CEO and controlling shareholder.
Although Post talks generously about his team, in any small agency, built from the ground up and run by a controlling shareholder, that man casts a huge shadow. So keeping Post motivated, despite the wad of cash he just got, is a big key to making this deal work for Cossette.
Post who is, 54, co founded what was then Emmerling & Post nine years ago. Among his considerable experience experience in the trade, he lists a stint as president of Lintas Advertising, now part Interpublic Group of Companies, one of the world's largest agencies. In interviews - as you might expect -- he comes off as a consummate pro, who knows all the buzzwords.
"This deal gives us the financial backing to continue our recent expansion," said Post. "We expect to work hard to achieve synergies across several areas of both businesses during the next few years especially (customer relations marketing) and increasingly in the interactive area." "
Cossette's senior executives -- many of which are Quebec francophones - have already expanded outside their borders once, elbowing aside a lot of big players to climb to the top of the Canadian ad industry. It's going to be interesting to see how they do down south.
Cossette shares jumped by $0.75 on the takeover news to close the day at $15.75.
Photo: A photo accompanying this story is available on the Canadian Press Photo Network/
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