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Musings on LBI International AB announcement

Posted by Susan Scrupski on July 31, 2006

I met my deadline early, so I will post some commentary here on the LBI/Framfab announcement. What we have here is a post-dot-com era rollup strategy. LBI International is now, unquestionably, the largest interactive agency in Europe. Robert (Pickering) told me in an interview recently that LBI is roughly 10x larger than the number 2 player in Europe and that the company is #3 in the world and probably #4 if you include Sapient. His plan to grow the company is still expanding. Margins have improved about 20% a quarter for the past six quarters and still moving up. Utilization is in the 50% range with a lot of opportunity for improvement. Overall the company has been growing 40% a year– organically 20% a year. With cash on the balance sheet and zero debt, the company share price has steadily been improving over 49% a year.

This is what Robert does. He’s a financial guy. He’s got the stret cred of a turnaround CEO. He did it at Philips global IT division, Origin B.V. and he’s doing it here. The question is, however, has this industry matured enough to withstand the weight of a rollup strategy? In web 1.0 the first to crumble were the rollups– iXL, USWeb/CKS, Luminant, etc. I may be off base here, but recognizing that these firms, interactive agencies, are largely creative services firms, there may be the same recurring issues. Creative people don’t always mesh; creative people are not a labor pool. Maybe the Europeans are cooler than Americans afterall, and they can “mashup” a culture. Any American who has spent time in Europe or the U.K. in a pub during World Cup season would be hard-pressed to believe that. I guess time will tell.

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