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The old Federalist Group had a certain MOD squad charm about it. The all-Republican lobby shop’s clients included gun, liquor and tobacco interests. And its partners, some with a folksy Southern drawl and all with impeccable connections, might just as easily talk huntin’ as leadership races on Capitol Hill.
That firm doesn’t exist anymore. It, quite literally, sold out.
And now the corporate-owned successor, Ogilvy Government Relations, faces an uncertain future as its parent company’s CEO is scheduled to arrive in town this week from London for private meetings.
Federalist sold to WPP Group, went bipartisan and took on the Ogilvy moniker. Some of the shop’s early partners exited two years ago when they had collected their portion of the sale through an earn out. Last week, the outfit lost four lobbyists, including its biggest rainmaker, Wayne Berman, who announced he was going inhouse with client Blackstone Group.
It’s a tale not uncommon to K Street: Build a firm with a lot of buzz and a long roster of clients, then sell to one of the big communications conglomerates that court lobbying firms the way single Hill staffers eye summer interns. But with a holding company’s cash often comes a culture change and directives from a headquarters that might not entirely sync with the business of K Street.
Top talent makes for the exits amid squabbles about control and how to divvy up the profits between the firm and its parent. Major staff departures can be a setback to any business. But on K Street — where personalities and relationships are the currency — it’s a serious blow.
“Our assets walk in and out of the door every day. It’s a complete people business,” said Tony Podesta, who owns the independent Podesta Group and has over the years considered selling out. “If people are unhappy, they don’t stay. Happiness is easier when it’s somewhat controllable inside your own organization than when you’re part of a much larger organization.”
Sir Martin Sorrell, WPP’s London-based chief executive, downplayed the significance of the departures and said Ogilvy Government Relations will continue.
“We’ve got many businesses in Washington,” he said. “And they’ve actually done quite well over the years. ... And they continue to do pretty well actually.”
WPP’s holdings include Glover Park Group, Wexler & Walker Public Policy Associates, QGA Public Affairs, Prime Policy Group and public relations firms Burson-Marsteller and Hill & Knowlton.
Sources familiar with Ogilvy Government Relations and WPP say the lobby shop and its parent company had a brewing conflict over profit sharing and management matters. WPP executive Howard Paster, a longtime lobbyist and Washington insider who died last year, had been the conglomerate’s point man for many of its K Street businesses, including Ogilvy. WPP has been unable to replace Paster’s penchant for diplomacy and knowledge of the business, these sources note.
Sorrell said Ogilvy lobbyists “requested a separation” from the Ogilvy public relations unit and that they now report to him and Mark Linaugh, who is WPP’s chief talent officer in New York.
Since last week’s departures, Ogilvy installed Chris Giblin as its new CEO to replace Drew Maloney, who left for the Republican National Committee. Gordon Taylor remains president, and Moses Mercado continues as chairman, though he had shared that title with Berman.
“Quite frankly, as big as producers that are leaving, they eat out of the profits of the firm also,” Taylor said. “Would anyone want those guys to leave? Absolutely not. But them leaving doesn’t mean that there is not a path forward. Will Ogilvy have to decide if they want to invest in attracting more talent to the firm? Absolutely. But we’ve got a core group of people that are staying for the moment. If those people stay, including myself, we’ve got a great book of business with great clients, and there’s potential for a great next phase.”
Some lobbyists, noting the Ogilvy departures probably are not over yet, have speculated that WPP could merge the remaining Ogilvy lobbyists into another of its firms. It’s been done before, when the former Timmons and Co. and BKSH shops blended into Prime Policy Group.
One contender in the past was QGA. But when asked whether he was considering a merger between Ogilvy or any of WPP’s K Street shops, Sorrell said “no.”
For a firm whose roots are in a GOP business, Ogilvy now has more Democrats than Republicans. Like Ogilvy, QGA could be in the market for Republicans, so the two might not be a good fit.
In any event, QGA chief Jack Quinn said his firm is looking for new hires.
“We want to let the dust settle a little bit in terms of having a better sense of who the players will be and what the issues will be in 2013 before we make any firm [hiring] decisions,” Quinn said.
His firm, too, has lost many of its original lobbyists — including former Republican name partner Ed Gillespie — and has seen its revenue decline. But Quinn notes that his firm has remained profitable.
Losing revenue seems pervasive among many of the corporate-owned firms, including WPP’s holdings. Cassidy & Associates, which sold out to Interpublic Group of Companies more than a decade ago, has lost its long-held position as the No. 1 firm in lobby revenue.
And some of the firms with the most buzz on K Street are independent, such as Podesta’s and Mehlman Vogel Castagnetti and McBee Strategic. The entire industry, worth at least $3.5 billion annually, has dipped slightly with the economic downturn — though Ogilvy Government Relations actually rose by 14 percent between 2010 and 2011.
Some lobbyists argue that the holding companies, looking to squeeze all the profits they can from K Street shops, have put those firms at a disadvantage from their more nimble independent peers.
But Quinn said there’s another side.
“It’s entirely possible that being owned by a $15 billion dollar holding company is a good thing because they can provide a buffer against the economic winds,” he said.