Big changes in agency land this week, topped by the news that FGS Global has finalized its exit from holding company WPP into the arms of private equity firm KKR.
FGS has consistently been WPP’s best PR agency performer in the last couple of years, since it was formed in late 2021 via the combination of Finsbury, Hering Schuppener, Glover Park Group and Saard Verbinnen.
In 2023, the firm posted year-over-year organic growth of 8%, according to PRWeek’s Agency Business Report, on top of near double-digit organic growth in the prior year.
“FGS Global continued to grow strongly in H1 2024, offset by declines at Burson due to the loss of Pfizer assignments and the impact of macroeconomic uncertainty on some areas of client spending,” according to a WPP statement.
It makes you wonder why WPP is selling off its best-performing PR asset, though the holding company will be comforted by the $768 million proceeds from the sale, after tax, which it will use to “reduce company debt” (perhaps that’s the answer).
FGS CEO Alex Geiser’s comments to PRWeek senior reporter Jess Ruderman yesterday were certainly telling.
“Having KKR as a partner as we accelerate our growth, and frankly, with very low synergies with WPP, became the logical step to take,” he said. He added that the agency was looking forward to no longer having the “strains of being part of a public company” and operating in an environment where, ultimately, WPP has the final word as majority shareholder.
“[The relationship] posed limitations to us, and, with our freedom, we’re going to be able to focus much more on ourselves and that, in itself, is already a net positive,” he said.
FGS operates squarely in the sweet spot of senior counsel that CEOs and C-suite executives are desperate for in today’s complex geopolitical and economic environment. The agency’s work is not as susceptible to the vagaries of the ups and downs of consumer markets and is tapping into the need for all enterprises to transform themselves quickly to survive and prosper.
Its leaders clearly didn’t believe it could achieve its entrepreneurial ambitions inside a holding company structure. Whether the sometimes-harsh waters of private equity will prove to be a more productive and welcoming environment remain to be seen, though FGS has certainly had time for a test run given the way KKR has gradually increased its stake in the firm. There is also the carrot of 500 agency staffers having a 26% stake in the venture. KKR will own the remaining 74%.
As for WPP CEO Mark Read, he said in a statement accompanying the holding company’s Q2 numbers: “The sale of our stake in FGS Global is an excellent outcome less than four years after its creation from three separate businesses within WPP. It will allow us to focus and invest in our core creative transformation offer while significantly strengthening our financial position.”
Overall, WPP’s PR operations grew 1.5% year over year in Q2 on a like-for-like basis. It declined 3.3% y-o-y in Q1 and was down 0.9% y-o-y in the first half of 2024.
Without the buffer of FGS’ numbers, the remaining WPP PR firms such as Burson will be expected to step up and replace that growth.
This was the first quarterly results release since BCW Group combined with Hill & Knowlton to form Burson, and it has yet to translate the optimistic talk around that launch into positive mentions in Read’s statements accompanying the numbers. That will likely be one item at the top of global CEO Corey duBrowa’s to-do list as the rest of the year progresses.
The PR agency holding companies are crystallizing around Omnicom PR Group, the independent Daniel J. Edelman Holdings and The Weber Shandwick Collective and Golin over at Interpublic Group, all competing in a land grab for market share and scale.
It will be interesting to see how WPP plays in this environment now it has said goodbye to FGS. And it will be fascinating to observe how FGS fares now it has shed its holding company shackles.
