How Craig Hart is stitching together a network of independent agencies

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Chris Pash
November 22, 2022

Craig Hart’s model for adding agencies to a company is different to that of the global advertising groups.

"originally-published" Originally published in AdNews, November 22, 2022

With the big guys, it’s a master-servant relationship: We’ve bought you and this is how things will work.

“We invest in businesses where they need growth capital, and we're very comfortable taking a minority position,” Hart, formerly of Omnicom in Asia, Photon Group and Blueprint Group, and now of Asembled Group, told AdNews.

“Control doesn't come from 50.1%. And sometimes, you shouldn't be obsessed with control, because it always comes at a price.

“We think that if you were to go to a controlling stake too early, it could stifle the entrepreneurial spirit that led the businesses to start in the first place.

“There's always plenty of time for increasing a stake, one day into the future, whenever there may be preparing for a liquidity event (sale).”

Hart was in Sydney last week talking to a couple of agencies and his Assembled Group is also in a conversation with an advisory business in London.

The deals he does typically include growth capital, money that stays in the business, and Assembled takes a 25% to 33% stake.

“As a starting proposition, we have a route to majority and we we would exercise that with care,” Hart says.

“The only businesses where we have more than 50% at the moment are the ones that we started, we started a property specialists marketing agency and we started Assembled Media. So we have the vast majority of those two companies and the staff have the rest.

“In the external businesses that we're investing in, we put in cash based on their need, and then negotiate what the right percentage is. It's unashamedly at a at the lower end of what the multiples would be. But that's because we do a lot of work.

“For our businesses, we don't just run a management meeting to say: How's the pipeline? Try harder. So we write the credentials for our agencies because we are blessed with enough knowledge but a greater share of objectivity, which allows us a very strong client perspective on what they may be looking for.

“We will review most major pitches. We contribute to the commercial proposition. We've sometimes rebranded businesses. So we think that for the cash and the assistance and the hands on high touch approach that we have … that's a good combination of what the agencies need.”

The Assembled is now getting enquiries from small independent agencies.

Many are lifestyle businesses that have allowed them to pay themselves a salary, not really make any profit.

“They're comfortable doing that because they don't really want to work for anybody else,” Hart says.

“Then that's not for us. You don't want to disrupt that.

“But if they've got an ambition to to be more than that, to grow the enterprise value of their business for one day having something that they can sell, and before they retire, then they will need to redefine themselves, create some value that a buyer can see … and that's where we step in.

“And there are a lot of lots of businesses out there that are small. Doing small is not a code for average, it can be some very good work done in those small businesses.

“They just need a bit of help. Even some of these very dynamic agencies out there all started small, started with people not wanting to work at Clemenger or somewhere and do their own thing and move on.

“And we were now being approached by them more than we're doing the approaching, which is nice. The dynamics are important. You want volunteers, you don't want to talk people into anything.

“I've had their job. I've run agencies below the line. Hard work and I wish I'd had someone to help me with more than just helping us with money.”

Hart sold a business to Omnicom in 2002.

“But I really didn't get anything from it. You know, I got a network. That was good. I ended up getting a job. That was nice.

“But there was no transference of people into new markets. They had an enormous intellectual and network capital, that either they weren't interested in providing to us because they were busy with other things, or we weren't smart enough to extract.

“I think that is hard enough. Let's see if we can get a few roadblocks out of the way of some of these small businesses, I don't think they will ever become major agencies. But that's okay. But they may become medium sized ones. And that incremental growth is exciting.”


Hart says there's no business in the world that’s recession proof but you can be in a better position if you get the model right, a balance of fixed and variable costs.

"An agency needs flexibility and a commercial model that deals with the headwinds that are the great unknown," he says

“Where will we be in 2023 and 2024? Is it going to be difficult?

“We know discretionary budgets dry up in these moments of economic turmoil. But people still need to market, they still need to communicate with clients, they still need to communicate with customers. There's not much brand loyalty left.

“The most relevant offer delivered to the customer coherently at the right price point has to happen. You've got to put yourself in their way.

“I think the economic mode hasn't changed in 50 years. And I'm not just talking about, you know, just a commission model. But I think agencies are going to have to they have a conviction of their promise. Put some fee at risk.

“And if you do, if you look carefully, you're not putting costs at risk, you're putting some margin at risk. That's what partnerships about, you know.

“How many agencies talk about the partnerships I have with clients? It's rubbish. It's rubbish, just just an anecdote.

"But you can breathe some reality into that lie by having some commercial alignment, and if you get it you can have a significant reward that is way beyond what you would have charged on a fee for service model.

“I don't think there's been much by way of commercial innovation in the game for a very long time.

“We started a media agency last year, it's small, we've got a couple of guys from initiative. And we're building a business around them. But that's nice, but that won't be enough. We're going to have to give people a commercial reason to make the change they would otherwise not have made.

“And that will mean, sometimes, saying: Look, here is a fee for service model in media, planning and buying, and you can have the commission back and you can have the rebate back and here's an open ledger.

“People talk about transparency. It's also a myth. But here's an open ledger audited account of your every we spent on your behalf, what we've received.

“I think there's some reorganisation in terms of that commercial proposition in media. That is a long overdue discussion. And we're trying to have it.”

The market

“Interesting times for us. I don't find it so daunting, I have to say, there's no question you have to work a bit harder, you have to try and be a bit smarter, and you've got to be a much better listener. One of the failings of our agencies in the world is we're very good at selling but we're not great at making clients buy. There’s a very big difference.

And even in a recessionary market, with declining brand loyalty, and all those things we talked about before getting to the customer, more customers deeper relationships more often, by delivering messages that they are going to engage with. Even in challenging economic times, you don't slow that down.

“In challenging economic times, you actually need to ramp it up more. The way of dealing with the challenges is sometimes an increased marketing response, as opposed to a reduced cost.

“I think that some parts of the market will slow down. There are certain brands that look at marketing as a discretionary cost, which they can do when they feel like it, but they don't really need to.

“There will be some challenges with some people who are spending a million dollars who will seek to spend $700,000. There'll be trimming of fat.”

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