The resources gained from the sale have boosted the company's growth.
If speed and agility represent the future for the marketing and communications industry, Columbus-based agency Fahlgren Mortine aced a crash course over the past 18 months. The company lost a $4 million long-term client, sold to a holding company and consolidated with another agency. Through the changes, it hung tight to a culture that creates loyal employees and clients, resulting in its best year ever in 2018 with 36 new clients and $33 million in revenue, a 15 percent increase over the previous year. And President and CEO Neil Mortine says 2019 is on track to break more records.
Mortine took the leadership helm at the end of the Great Recession in 2010, just as the agency parted ways with three of its biggest advertising clients, dropping revenue from $18 million to $12 million. He made three acquisitions the year he became president in an aggressive effort to add new business: Cleveland-based Edward Howard & Co., Columbus-based Grip Technology and certain assets from Dayton-based Sabatino/Day. Mortine says these acquisitions, along with organic growth and reductions to payroll, pulled the company’s revenue back up to $18 million.
In 2014, Falhgren Mortine acquired New York-based Turner PR and its global portfolio of clients in the travel, tourism and active lifestyle industries. This sale was a self- and buyer-funded acquisition for Fahlgren.Stay up to date with the region’s movers and shakers, top employers, philanthropic causes, real estate developments and thriving creative and startup scenes. Subscribe to Columbus CEO’s weekly newsletter.
A midsize integrated agency, Fahlgren Mortine considers itself a generalist firm, though it specializes in travel and tourism, economic development and business-to-business. It also does work in technology, higher education, professional and financial services and other areas as needed by its more than 200 clients. Its client services run the gamut—anything from public relations work for the Major League Baseball All-Star Game to advertising for TravelNevada.
Fahlgren Mortine now has 11 offices nationwide, and its revenue has nearly tripled during Mortine’s time as CEO, from $12 million in 2010 to $33 million in 2018. The agency reports annual revenue growth of more than 12 percent, which beats the industry norm, according to Kim Sample, president of the New York-based trade association PR Council. Mortine serves on its board.
“Fahlgren’s growth is outpacing its peers,” says Sample, who attributes much of this growth to smart acquisitions such as Turner in New York. “Many agencies are working to be full service and Fahlgren is able to deliver that and geographic reach, which is very important.”
Decision to sell
Looking toward the next big acquisition after Turner, Mortine hit a wall on financial resources. “We were sitting on a lot of growth, but needed more access to resources and revenue to fund that growth,” he says. In 2015 and 2016, Mortine sat down with the board of directors and John Fahlgren and his sister Becki Hertrich, who represented the majority ownership in the company their father Smoot Fahlgren founded in 1962. The shareholders developed a long-range business plan and began considering buyers to potentially transition ownership to a publicly or privately held holding company. “We were ready to pass the torch to an owner with deeper resources,” John Fahlgren says. Potential buyers had approached the agency over the years, but none seemed the right fit. “We’re fiercely independent,” Mortine says. “My angst was finding the right suitor.”Neil Mortine: We’ve got to be bigger, better, faster and be in front of our clients with what’s next. Here's a Q&A we ran in the Columbus Dispatch.
Fahlgren Mortine began conversations with Memphis, Tennessee-based Eastport Holdings in 2017 and watched the company acquire local competitor and colleague agency SBC Advertising.
“We needed next-level revenue to propel our growth,” Mortine says. “We kept coming back to SBC. SBC was happy with their experience. It was the right buyer at the right time.” The sale took more than a year to finalize, but Matt Wilson, president and chief operating officer of Eastport Holdings, says deals like this, with many stakeholders, take time. “You have to get an organization to warm up to the idea that this makes sense from a culture and financial point of view. And then dive into specific numbers.”
Fahlgren Mortine finalized its sale to Eastport Holdings in February 2018. “Of all of our acquisitions, this one took longer, but it’s one of the best in our portfolio,” Wilson says.
Mortine says his agency got access to resources while retaining its identity and ability to contribute to the local community. The 57-year-old agency prides itself on its culture, with voluntary employee turnover at half the industry average. It wanted a buyer that would allow it to run independently and found that in Eastport. It also gained legal, administrative and back-of-house accounting services from the seven-member Eastport team.
Being the 17th agency owned by Eastport Holdings, Fahlgren can also cross sell with sister agencies— including locally based FiveHundred Degrees Studio and Mindstream Interactive. Eastport’s acquisition of Fahlgren Mortine filled holes in its portfolio: strong public relations and social media services and a great practice in travel and tourism. “Eastport is a house of brands,” says Wilson. “We want competitive clearance— we don’t want to have any competitive or conflict challenges.”
Fahlgren’s national presence and demonstrated “client stickiness” also made it an attractive acquisition. Mortine says Fahlgren’s average client relationship lasts eight years compared to the industry average of just over two. Though specific terms of the Fahlgren Mortine sale are proprietary, Wilson says Eastport did look at performance terms: revenue and profit trends over three years. “We have a growth formula: 9 percent year-over-year as a minimum. Three percent new business, 3 percent organic growth and 3 percent cross selling within the network.” The sale also included an agreement that the existing management team would remain.
“We make sure that the team that stays behind has another gig in their transmission. We want to dig in for the future—and the future of the holding company,” Wilson says. Eastport saw Neil Mortine as the “jewel in the crown” along with the company’s chief financial officer Brent Holbert and executive vice presidents with different areas of expertise.
Mortine knew the sale would mean change, but it came more quickly than expected. Three months after selling to Eastport Holdings, Fahlgren Mortine consolidated with SBC Advertising. Wilson, who came to Eastport Holdings from SBC Advertising, says the company didn’t need so many agencies in Columbus. “This combined two really strong groups. They’d been in different swim lanes but servicing the accounts together.”
With the support of Eastport Holdings’ capital and resources, Mortine foresees growth not only in revenue and employees, but in the company’s geographic reach and service areas through both organic growth and new acquisitions. “If you’re not growing, you’re dying,” he says. “We have grown into a national agency from Columbus, Ohio.”