Five lobbying and public affairs firms have set up their own holding company, an unconventional partnership in the influence industry that allows them to expand their businesses while remaining independent.
The Public Policy Holding Company will specialize in advocacy and is owned by the participating firms, a contrast to the more common practice of massive multinationals gobbling up K Street firms.
It’s comprised of top Washington lobby shops Crossroads Strategies, Forbes Tate Partners and Alpine Group, as well as O’Neill and Associates of Boston and Washington-based public affairs firm Seven Letter.
“It’s the difference between putting together a professional franchise versus playing fantasy football,” said Benjamin Ginsberg, a political law attorney at Jones Day who helped the company with lobbying compliance matters. “They have rightly sensed that putting together the franchise makes more sense. It’s more in line with what companies want these days.”
The holding company itself is small, staffed with a handful of its own employees to handle the company’s finances and human resources. It’s managed by members of each of the firms, all of whom have an equity stake.
The benefits for the firms include being able to offer clients a suite of lobbying, public affairs and state-level advocacy without sacrificing their individual brands or businesses.
“You’ll share business, business will be rerouted to you,” said former Massachusetts Lt. Gov. Tom O’Neill, of O’Neill and Associates, when asked why he was attracted to it. “If you have a conflict, you have a sister company you can drive it to. If you need an expertise that you haven’t got, you can pull it into a team that may meet that expertise.”
The venture was the brainchild of Stewart Hall, the chairman of Crossroads Strategies. It’s been in the works for years but accelerated over the past 18 months with a search to find additional firms to join.
The combined revenue of all the firms in the holding company is projected to reach more than $70 million by the end of the year, according to Hall, who said he wants it to “be aggressive in our marketplace and start to find ways to increase our footprint.”
The structure also allows the holding company to fund the growth with tools such as private equity investment or an initial public offering. But those options could be further down the road.
‘Taking Opposite Approach’
Multi-billion-dollar holding companies such as WPP plc and Omnicom Group Inc., which tended to mostly acquired advertising firms, have bought lobbying and public affairs firms in Washington — but public policy work “isn’t in their DNA,” Hall said.
“We’re taking the opposite approach,” he said. “We’re starting with what we know.”
Hall sold a firm he founded, the Federalist Group, to WPP-owned Ogilvy Public Relations in 2005. Five years later, he left Ogilvy and founded Crossroads Strategies. Many of the other participants also had experience selling to a large holding company and then ending up starting their own firms anew.
Hall is the general manager of the holding company, though his time is primarily still spent on his lobbying day job. Most of the separate staff of five that runs the company’s operations are veterans of WPP.
The company is now looking to bring in other firms, including in state capitals such as Sacramento and Austin as client interest in state advocacy increases.
There are strict firewalls that prevent them from talking about specific client matters outside of any shared efforts, all the participants said, and the model is designed to prevent conflicts. However, the various firms represent industry competitors in some cases. Alpine Group’s Greg Means said none of the firm’s clients have taken issue with the partnership.
For instance, Forbes Tate has Verizon Communications Inc. and T-Mobile US Inc. as clients, the No. 1 and No. 2 cellular carriers. Crossroads Strategies represents AT&T Inc., and Alpine Group has United States Cellular Corp., the third- and fourth-largest carriers, respectively. Forbes Tate has Oracle Corp. as a client, while Crossroads Strategies represents Salesforce.com Inc.
While the firms operate separately from each other, having the equity partnership opens up the possibility that a firm could benefit financially from losing a policy battle if a sister firm has a client on the other side.
Erik Smith of Seven Letter says those involved don’t talk about which clients they’re pitching or signing, adding that “it’s possible that we can be working on other sides of issues, but it’s not designed for that.”
Ultimately, the firm executives say that the partnership is a response to the influence industry that has evolved over the last two decades.
“Technology has changed the business a lot,” said Means, who said clients want more advocacy sophistication that can reach a wide range of people at once.
To contact the reporter on this story: Megan R. Wilson in Washington at email@example.com