Padilla, the largest independent public-relations firm remaining in the state, is being acquired by Avenir Global, a Montreal-based management company of public relations firms.
Avenir CEO Jean-Pierre Vasseur said he approached Minneapolis-based Padilla in recent months because of its collaborative culture, financial results and the fact that its growing portfolio of blue-chip and small- business clients will give the Canadian company a significant beachhead in the U.S.
Padilla CEO Lynn Casey, a veteran of more than 30 years with employee-owned Padilla and a predecessor agency, plans to remain for up to two years to work on integration issues and with key customers.
"We weren't thinking about selling," said Casey. Padilla employs 200 people and has revenue of $40 million. "A number of firms contacted us. None ever got to the offer stage. We have a number of markers in place to make sure that if we ever sold that it would truly be the best course of action for the shareholders and the future of the company. None hit the markers."
She said a key factor that made Avenir attractive is that it gives its agencies a "fair degree of independence."
"For our clients, being something bigger, as long as we are successful … we can reach across Avenier Global for client collaboration and assistance for services that Padilla may not offer," she added.
The business-communications industry has been marked over the last 15 years by multibillion-dollar revenue conglomerates out of New York, London and elsewhere buying regional firms, including the sale of the former Mona Meyer McGrath to Weber Shandwick and the sale of Fallon, Carmichael Lynch and Campbell Mithun, marketing-communication agencies. That also led to consolidation and shrinkage at those shops.
Meanwhile, a number of small, independent agencies in PR and advertising have sprung up, often started by former managers at the regional agencies.
Casey, 63, Padilla chief executive since 2001, said she did not want Padilla to be acquired by a larger publicly held firm that would move quickly to cut costs and focus on increasing quarterly profits.
Vasseur, 59, said privately held Avenir generated revenue of more than $100 million before the Padilla deal. Andrew Molson, an attorney and board member of the family-owned Molson Coors Brewing Company, is the largest shareholder in Avenir.
Padilla gives Avenir, which also owns Shift Communications in Boston, a Midwest base with clients who range to the coasts and overseas. Clients include 3M, Blue Cross and Blue Shield of Minnesota, Cargill Animal Nutrition, Mayo Clinic, Prosciutto di Parma, Rockwell Automation and IntriCon.
"A year ago we started looking for a bigger firm in the United States," Vasseur said. "We fell for Lynn and [Padilla President] Matt Kucharski. Their professionalism and leadership and business acumen and community involvement."
While Padilla's roots have always been that of a public-relations firm, the agency has expanded its services to include advertising, design, brand strategy, among other offerings.
"They have really evolved into a very integrated media agency," said Steve Wehrenberg, a professor at the University of Minnesota and former advertising executive.
Wehrenberg, who knows Casey and several other Padilla leaders personally, said he considered the deal a "win-win" for Padilla and Avenir Global.
While the fact the firm was employee-owned was unique, the model can also create some challenges such as balancing company investments vs. other financial obligations, he said.
"[Avenir] doesn't have a lot of duplicative operations in North America so I think they are going to let Padilla be Padilla, which is the greatest thing that can happen when you are acquired by somebody," Wehrenberg said.
Kucharski, 50, will run day-to-day operation at Padilla. He and Casey will report directly to Vasseur. Casey said she had planned to retire as CEO this summer. The acquisition means she will remain as the top Padilla operative executive for up to two years.
Padilla's value, based on consistent profitability, has grown steadily and meant six-figure wealth to many vested employees at retirement or when they leave the company. About 250 current and former Padilla employees will benefit from the transaction.