Pat Kempf and Tom Moroch describe the four-pronged growth strategy that fuels their full-service ad agency. Liz French reports.

When full service advertising agency Moroch got its start back in 1981, it had two clients in the Dallas/Fort Worth area and $3 million in billing. Today, the company has 25 offices from coast to coast and is doing nationwide campaigns for leading brands such as Walt Disney Pictures, 20th Century Fox, New Line Cinema, and Monster.com, and 2006 billings are estimated at $200 million. But according to founders Pat Kempf and Tom Moroch, success didn’t happen overnight.

Moroch and Kempf credit the company’s growth over the years to a four-pronged strategy. For starters, the company has remained focused on growing with its existing client base, a prime example being its relationship with McDonald’s. The fast-food giant was one of Moroch’s first clients back in 1981, and the first few campaigns targeted only the Dallas/Fort Worth area. Today, Moroch manages local McDonald’s campaigns in one-third of the US as well as several nationwide campaigns.

The second prong of Moroch’s growth strategy, which ultimately loops back to the first, is new business development. “Once we bring new clients on board, we develop long-term relationships so we can growth with them like we did with McDonald’s,” said Kempf.

In recent years, the company has put significant emphasis on the third prong—growth through acquisition—and Kempf and Moroch have developed protocol for choosing the right partner. For an acquisition to be successful, it has to add talent in areas the company is looking to grow, complement Moroch’s chemistry, and/or bring new business that will grow over time.

Moroch’s acquisition efforts began in 1987 when it purchased Oklahoma agency Lowe Runkle Company to expand its geographic presence in the region. In 1998, Moroch acquired a portion of Fahlgren Advertising, increasing its business volume with McDonald’s and creating office locations in the Southeast.

In the mid-’80s, the company formed Moroch Entertainment to provide local market advertising to leading film studios and began producing campaigns for MGM and Walt Disney Pictures. In 1999, Moroch acquired Tampa-based Moore Epstein Moore Advertising, a company focused on the film industry. The acquisition enabled the company to increase business with Disney and Fox; acquire new clients, including Warner Bros. and Dreamworks; and develop a stronger geographic presence in the Southeast with offices in Atlanta and Miami. To further bolster its film division, Moroch acquired George Grube Advertising in 2005, which once again increased business with existing clients and added new ones, such as Universal, Paramount Vantage, and Sony Classics.

In 2002, Moroch acquired creative group Coffee Black and Web and digital media development company Wide Eye Interactive. “Without a doubt, the acquisition of Coffee Black and Wide Eye has been our greatest success. Not only did it bring us fantastic creative talent and clients who are all still with us today, but the chemistry was ideal,” said Kempf. In 2005, Moroch’s revenues were a healthy $113 million, but since the acquisition of Coffee Black, they have skyrocketed up to $200 million.

Kempf added that Moroch did a project with Coffee Black prior to the acquisition to test the waters, and the results were positive. “In the ad business, you run into all types of personalities, so you have to take that into consideration. We are open and team oriented, and we fit hand-in-glove with Coffee Black,” Moroch said.

The final component of the growth strategy is to stay active in emerging markets. For example, due to the booming Hispanic population in the US, Moroch is revving up Inspire, a full service advertising agency targeting Hispanic consumers, and Wide Eye is growing in leaps and bounds with the ever-increasing use of the Internet and digital media.

Buying back
To boost growth, the company sold 30% of its stock to Burnett Company, Inc., an international holding company, in 2000. “The objective was to accelerate our growth by providing local services to Burnett clients, and we could work together to attract new clients. It had all the makings of a positive and successful venture,” said Moroch.

A few years later, Moroch’s ownership changed hands when the Burnett Company was bought by the Publicis Groupe, an advertising and media services conglomerate. By 2005, all the people Moroch had originally dealt with were gone, and it “no longer had the connection with the stockholder partner that we had when we first went into business,” Moroch said. The company bought its stock back in 2005 and returned to being a fully independent company.

“While we had some growth and strategic benefit to our company when we were dual-owners, we are now growing at a more accelerated pace and are comfortable with our position. Not much has changed other than we don’t have to report to anyone else,” Moroch said.

Hub and spoke
Many advertising agencies hesitate to branch out beyond their corporate headquarters, instead choosing to serve all of their clients out of one location. But Moroch subscribes to a different notion: clients are best served at the local level. The founders explained that the Houston office serves all clients, but its branch offices are client-specific. For instance, the Atlanta office works with Midas, Monster.com, and McDonald’s, while its Parkersburg, WV office serves only McDonald’s. “Each office has its own personality and its own list of clients,” said Moroch.

To open up branch offices to serve a specific set of clients requires uncanny confidence that each client is in it for the long haul—but Moroch hasn’t disappointed a single client in its 25-year history. “For a lot of companies, satellite offices are strategic lightning rods, but we are not afraid to open up offices away from headquarters,” Moroch said.

“Longevity is determined by the quality of the work you perform for a client. We fully understand the industries we have chosen to focus on, and we guarantee the same quality across all media.”