McConnells wind-up leaves sour taste in mouths of media owners
IT'S never pleasant when a trading partner goes bust, but the receivership of ad agency McConnells has left a particularly sour taste in the mouths of Ireland's media owners.
The iconic agency was taken out by Ulster Bank last Friday before its "assets and goodwill" were bought by rival agency DDFH&B just hours later, a deal done with almost indecent haste.
The problem for media owners is simple -- McConnells, through its media-buying outfit MMC, owes them rather a lot of money and it now appears that those debts have been consigned to the receivership process, where they'll rank behind Ulster Bank's.
And to add insult to injury, some of the most senior figures in the industry say they've had "absolutely no formal communication" from either McConnells, DDFH&B or any of their many offshoots to tell them what's going on.
"It's an extraordinary situation," said one executive, who says he won't be running any more adverts booked by McConnells until he gets absolute clarity on who'll be signing the cheques.
The confusion is echoed all over town. Some media owners say they've been told DDFH&B offshoot Maxus will underwrite any ads booked by McConnells and run after last Monday.
Others say the Maxus guarantee should cover last weekend's bookings, since DDFH&B took over the business on Friday.
The main problem, though, is not MCM's live bookings, it's the bookings media owners have already placed and haven't been paid for.
Agencies typically pay the bills at the end of the calendar month, implying that media owners are owed for everything booked by MCM since April 1, at the very least.
Firm figures on MCM's outstanding bills to media owners are hard to come by, but the company's last filed accounts show €5.5m was owed to "trade and other creditors" on December 31, 2008.
That figure is likely to include a full month's fees outstanding rather than the 20 or so days thought to be outstanding now, while McConnells' client base has also shrunk somewhat since then. All in, outstanding bills to media owners are likely to be in the range of €2m-€3m.
Some media owners have credit insurance to cover this type of thing, but they're quick to point out that having credit insurance doesn't mean they won't try to collect.
"That's like saying that if you burn down my house and I have insurance, I won't mind," says one. "It's just not how it works. We have a legal obligation to try and get back our money."
How that collection process can be played out remains to be seen. Media owners are expecting a letter from Ulster Bank's receiver later in the week, which may clear some of the smoke but would seem unlikely to lead to substantial payments.
"When there's a bank in there before you [in the creditors' ranking], realistically you couldn't be expecting much," says one.
Others talk about applying "pressure" to DDFH&B's various offshoots to make good on the debts and sort the situation out.
Indeed, Mindshare boss David Sneddon, who counts DDFH&B as his 50pc shareholder, was called to task after (bravely) giving a speech to a gathering of radio executives on Tuesday.
Acknowledging the "uncertainty" in the industry, Sneddon stressed that management was "working 24/7 to put those fears at rest" and resolve "what I understand is a very difficult situation for everyone".
How exactly they plan to do that remains to be seen.