WPP Group PLC, a British marketing firm, yesterday announced it had acquired two Washington-area public relations and communications firms for as much as $35 million.
The acquisition of Reese Communications Cos. Inc. and Targeting Systems Inc. is small compared to WPP's recent $566 million buyout of JWT Group Inc., parent of J. Walter Thompson Co., the world's fourth-largest advertising agency. However, it is another step in WPP's goal of becoming a major multinational marketing services company, said Robert Lerwill, chief executive officer of WPP Group.
"We've always stated that it's our intention to build up an international communications company," said Lerwill. "Since 50 percent of worldwide marketing services activity is in the U.S., it's highly likely that a number of acquisitions will be here."
When WPP Group, let by its 42-year-old chief executive, Martin S. Sorrell, swallowed the 15 times larger JWT Group last month, many in the U.S. financial community were startled by the ambitious takeover.
Matthew A. Reese, the veteran Democatic pollster and consultant who came to town with the Kennedy-Johnson campaign, is the founder and major shareholder of both RCC and TSI. Reese and senior management employes of the companies have entered into long-term contracts with WPP to continue running the firms. Reese will join the board of directors of Rasor Communications Inc., the company that coordinates WPP's nonmedia communications businesses in the United States, WPP said.
In addition, the Arlington-based companies will retain their present names, and there are expected to be no major changes in the 70 employes of the companies, Reese said yesterday.
Reese said that things had been going so well for his companies that he had considered an association with a larger group to give RCC and TSI additional resources, so he was receptive when WPP approached him with an offer.
Reese Communications, which was originally called Matthew Reese & Associates when it began in 1966 as a political polling and consulting firm, now does direct mail advertising and issues marketing primarily for corporate and association clients, including AT&T Communications, Georgia Power Co., Drexel Burnham Lambert Inc. and Philip Morris Corp.
TSI, established in 1978, is a sister organization that does geographic and demographic research and polling on both products and issues.
Over the last five years the combined revenues of RCC and TSI have grown from $4.5 million to $14.4 million, according to the WPP announcement, which said that profits before taxes have grown from $512,000 to $3.5 million.
WPP Group will pay an initial $14 million in cash for the two companies. Further payments in cash and WPP shares will be made in 1989, 1990 and 1992 and will be based on a multiple of after-tax profits. The maximum total payments for the two companies is $35 million.
Lerwill said yesterday that Reese Communications and TSI will remain autonomous and there is no consideration of merging the firms with the Washington office of Hill & Knowlton, which WPP acquired when it bought JWT Group