THE DOWNSIDE OF SELLING A LOBBYING FIRM TO A CONGLOMERATE

Major companies in the field of lobbying and political consulting services are divisions of global advertising and communications giants such as WWP, Omnicom, Interpublic as well as independent firms such as Blue Focus (China), Brunswick Group (UK) and Edelman (US).

The acquisition of lobbying firms by global giants was propelled by two financial facts. First lobbying firms can be extremely profitable- more profitable, in fact than public relations or advertising, the basic business of the parent companies. Thanks to the high retainers lobbyists tend to charge, the ratio of pre-tax profit to revenue, or profit margin of a lobbying firm can run from 25 to 50 percent compared with a large PR firm’s 10 to 15 percent. Second, the principals of lobbying and lobbying-related firms are often eager to sell their ownership to bigger companies, especially when they are contemplating retirement. Their income from sale (because it usually involves the transfer of stock) is taxed at capital gain rates, which are lower than regular income tax rates.

But in exchange for their newfound wealth (which regularly reaches into millions of dollars), the former owners must deliver what can sometimes be unrealistically large profits for their new parent companies. Corporate ownership can also limit flexibility and risk-taking which typically are traits that allowed the firms to thrive in the first place.

Lobbyists who sell their firms are usually obliged to remain with the company for up to five years, the purchase price tied to maintaining revenue growth over that period. As with many service-oriented enterprises, lobbying is heavily dependent on the personal involvement of the principals. In fact, the relationships that the principals bring to the table are often the business's cheif asset.

Bought out firms also have sometimes trouble attracting young talent, because they can't offer susbtantial ownership stakes.

The fit in a merger needs to be just right to create a growing, ongoing concern. Acquisitions are never as attractive as they sound. Given the drawbacks of outright acquisitions, all sorts of arrangements short of a complete sale, such as merging existing firms and consolidating their administrative functions may make more sense.  

WPP owns

1. QGA Public Affairs
2. Adgistics
3. Always Marketing Services
4. Axicom
5. Benenson Strategy Group
6. Bisqit
7. Blanc & Otus
8. Blumberry
9. BPG Group
10. Buchanan Communications
11. Burson-Marsteller
12. B/W/R
13. Carl Byoir Associates
14. Cerebra
15. Chime Communications Limited
16. Clarion Communications
17. Cohn & Wolfe
18. Dentsu Y&R
19. Dewey Square Group LLC
20. Digital PR
21. Direct Impact
22. Essence Communications/Burson Marsteller
23. Feinstein Kean Healthcare (FHK)
24. Finsbury
25. GCI Group
26. Grey Group
27. Hering Schuppener
28. Hill + Knowlton Strategies
29. Intermarkets/VML
30. IPAN Hill & Knowlton Strategies
31. Lorien Consulting
32. M80
33. Memac Ogilvy
34. Menacom
35. NATIONAL Public Relations
36. Ogilvy Commonwealth Worldwide
37. Ogilvy Government Relations
38. Ogilvy Public Relations
39. Palisades Media Venture
40. PBN Hill & Knowlton Strategies
41. Penn Shoen Berland
42. PPR
43. Prime Policy Group
44. Prism
45. Proof Integrated Communications
46. Public Strategies Inc.
47. Red Fuse Communications
48. ResourcenReich
49. RPCA
50. Scholz & Friends
51. Soho Square
52. The Food Group
53. The Glover Park Group
54. The Social Partners
55. Wexler & Walker
56. WPP Scangroup
57. Young & Rubicam Group

 Omnicom owns

1. FleishmanHillard
2. Ketchum
3. Porter Novelli
4. Marina Maher
5. Portland
6. CLS Strategies
7. Cone
8. GPlus
9. Mercury
10. Paul Wilmot Communication

Interpublic owns

1. Webershandwick
2. Cassidy & Associates
3. Golin
4. Mc Cann Erikson

Publicis owns

1. MSL Group