MEDIA & MARKETING:Unsecured creditors of Ireland's largest agency are likely to be stung for all they are owed
UNSECURED CREDITORS of ad agency McConnells look like being stung for everything they are owed following a “pre-pack” receivership that saw the assets and goodwill of the firm transfer to rival ad agency DDFH&B.
A pre-pack, common practice in Britain but still a novelty in Ireland, is where an arrangement to sell all or part of a company’s business or assets is made before a receiver is appointed. The receiver then implements the sale immediately.
Calling the shots with the McConnells pre-pack was the agency’s main banker, Ulster Bank. The bank assisted in the funding of AFA O’Meara’s purchase of McConnells two years ago and is now cutting its losses.
It is not known how much DDFH&B vehicle Latinollo Ltd paid the receiver for the McConnells assets; trade sources speculated that the consideration was in the region of €1.5 million.
Latinollo’s principals are DDFH&B directors Jim Donnelly and Michael O’Reilly. Donnelly’s brother Pat Donnelly, who was the head of media in McConnells, is now the agency’s chief executive. The Donnellys have made it clear that they will not be honouring any debts incurred by McConnells prior to the takeover.
McConnells’ unsecured creditors, who are largely accounted for by media owners, are believed to be owed in the region of €4 million. However, nobody knows for sure as creditors are being told that no Statement of Affairs for McConnells has been prepared. The debtors list is believed be in the region of €5 million.
There are about 10 companies in the McConnells group where Tom Kavanagh has been installed as receiver. Kavanagh has written to the unsecured creditors requesting copies of invoices for money they are owed which he says he will then pass onto McConnells’ former owners.
Only after Kavanagh has completed his receivership process will there then be the option for the former owners to put the company into liquidation and a chance for the unsecured creditors to pick up any crumbs.
It’s a messy situation that some McConnells clients are running away from. AIB, who had put their account out to tender before the collapse, has confirmed that it is moving its media buying account from McConnells to the ad agency Starcom. In a letter to media owners this week, AIB confirmed it would underwrite all bookings made on its behalf during April. CIÉ and BMW have signalled they are invoking clauses in their contracts which allows them to put their accounts out to tender in the event of a change of ownership. Also out to pitch now are the ESB and IDA accounts.
The ripples from the McConnells collapse are spreading across the sector. Media owners such as newspapers and TV and radio station owners look sure to tighten up the credit terms they afford other agencies, while smaller production companies stung by McConnells are now looking for payment upfront. McConnells, founded by Charlie McConnell in 1916, was Ireland’s largest indigenous advertising agency. It was bought in 2008 by Stuart Fogarty, who had preciously expanded his family firm by taking over Des O’Meara, another leading ad agency.
The deal was always a reach for Fogarty as McConnells’ turnover was four times that of AFA O’Meara. Part of the financial logic underpinning the deal was the development potential of the AFA-owned premises on St James Place in Dublin 2.
That plan came unstuck due to the property crash, and then the recession put paid to the business plan projections. The individuals who sold McConnells to Fogarty two years ago have been left short too. The payouts were on a phased basis and it is believed the vendors have not received all that was due to them.
Perhaps equally annoying to the vendors, who included John Fanning, is that McConnells will now be remembered not for such iconic advertising as “Are You Going For A Pint?” as for leaving a string of creditors in its wake.
As for Fogarty, he is currently on a short-term contract with the new owners of McConnells, assisting with the transition and will be leaving the agency in the near future.
How the new McConnells will fare remains to be seen. What’s clear is that yet more control over Ireland’s advertising scene has passed overseas. DDFH&B is part-owned by Martin Sorrell’s WPP Group. WPP’s subsidiaries in Ireland already include Mindshare, a large media buyer, as well as ad agencies JWT, Ogilvy & Mather, MediaCom and MEC Global.
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The iPhone is the only phone people seem to want these days. If you’re an O2 or Vodafone customer, that’s not a problem. But the iPhone is currently not available for purchase on the Meteor network.
So while the other networks push their iPhones, Meteor has invested €1.5 million in a new advertising campaign entitled “House Party” to promote its new limited free internet offering to its prepay customers. Of the new ad campaign, Meteor’s chief commercial officer, John Penberthy Smith, says: “Filmed in Ireland, the idea focuses on friends getting together at a party and using the internet on their mobile to update their status on Facebook, chat and watch the latest online videos.”
