FGS/KKR: Rudd letter day is a money-spinner for City PRs

Reputation matters. Just ask City PR Roland Rudd. His latest deal — which involves KKR buying into FGS, the global communications group he chairs, at a $1.4bn valuation — further burnishes his credentials for financial acumen.

KKR is expected to acquire more than 30 per cent of FGS, a company formed through the merger of London’s Finsbury with Germany’s Hering Schuppener and US peer Sard Verbinnen.

A small chunk of that will come from advertising giant WPP, which holds 57.4 per cent of FGS and will retain a majority. Golden Gate Capital will sell the entirety of its 6 to 7 per cent stake. FGS senior employees, who own about 36 per cent of the company, will sell almost half of their collective stake.

The transaction allows the partners to monetise a large slice of their equity at a high valuation, in the region of 15 times 2023 ebitda. And it will give the PR group access to KKR’s steady deal flow.

More broadly, the deal highlights how the PR business has changed. Gone are the days in which a PR whole shop revolved around one or two extremely well-networked individuals — apparently unassuming but with the capacity to make that one crucial phone call that would turn the tide in a deal. These are now big, global companies. FGS has 1200 people. Rival Brunswick has 1500.

That helps explain why private equity is nosing about. KKR, with cash burning a hole in its pocket from its latest European fundraising, is just the latest example. Brunswick raised money from BDT Capital Partners in 2021, while much smaller rival Tulchan recently sold itself to private equity-backed Teneo.

True, times are not great in capital markets. But PR groups are no longer as dependent as they were on hefty one-off fees from M&A transactions. Crisis management provides a useful countercyclical earnings stream. And these groups are hired to buff up the personal brand of chief executives. Even in a storm, a lot of ballast will go before their fees get trimmed.