(Bloomberg) -- FGS Global has revamped its management structure as private equity firm KKR & Co. rapidly puts its stamp on the corporate communications group after buying control.
As part of the shake-up, KKR’s European private equity co-head Philipp Freise and several colleagues will join two new governing bodies, according to an internal memo seen by Bloomberg News. The US buyout firm is expected to close its purchase of a controlling stake in FGS early next week.
A Global Shareholder Committee will be responsible for long-term strategy, while a Global Executive Board will steer day-to-day operations, the memo shows. They replace the existing Global Partnership Board and Board of Directors.
Roland Rudd will chair the shareholder committee, while Alexander Geiser will chair the executive committee and Carter Eskew will oversee the remuneration committee. George Sard, co-founder of predecessor firm Sard Verbinnen & Co., has been named to the new role of chair of the US business.
“This new governance structure, coupled with our growth strategy, will set us up well to realize the ambition which all of us have for FGS Global: to become the undisputed #1 global communications and public affairs consultancy in the world,” according to the memo.
New York-based KKR in August agreed to increase its stake in FGS to about 80% from 30% by buying WPP Plc’s remaining holding for $775 million. The deal gives FGS an enterprise value of $1.7 billion.
FGS, which helps companies with crisis management, financial communications and government affairs, has grown into one of the world’s biggest corporate communications firms through a series of tie-ups. Finsbury merged with US agency Glover Park Group and Germany’s Hering Schuppener in 2021, and later added US deals specialist Sard Verbinnen to the group. FGS now has about 1,400 employees in 31 offices, according to its website.
Earlier this month, Bloomberg News reported that FGS had hired management consultancy McKinsey & Co. to advise on its growth strategy. The three-month process, dubbed “Project Thunder,” aims to develop and execute a business plan for the PR firm to achieve its “most ambitious growth opportunities” from 2025 to 2027.
The hiring of McKinsey triggered concern among some employees that there could also be job and cost cuts down the line under a traditional private equity ownership model, though KKR and FGS leaders have stressed they’re focused on expanding the breadth of the company’s offerings and have no plans to reduce headcount, according to people familiar with the matter.
Some within FGS are also worried about whether the buyout firm fully understands the relationship-based nature of the communications business, which can make it harder to calculate metrics like billable hours and precisely quantify who’s bringing in the most revenue, the people said. Long-time staffers see public relations as a classic “people business” where rapport with top executives and dealmakers can often determine success or failure.
To be fair, KKR already owns sustainability consultancy ERM Group Inc., another people-focused business, and has had a relationship with FGS for years. Representatives for FGS and KKR declined to comment.
FGS’s revenue rose 7% to $367.1 million in the nine months through Sept. 30, led by growth in the US and UK, according to an investor report seen by Bloomberg. It reported an adjusted Ebitda profit margin of 20%. Staff costs rose 7% to $243.6 million, driven by new hires as well as market pressure to retain talent. North America — where the business of PR is the most lucrative and also the most competitive — accounted for 64% of FGS’s revenue during the period. The UK, Middle East and Asia generated 20%, while Europe contributed 16%.
In the report, FGS forecast 5% organic growth by the end of 2024. While it described its pipeline as “promising,” the firm wrote that it remained “cautious” on its full-year outlook because of uncertain levels of European capital markets activity, overall business environment, US presidential election, inflation and geopolitical instability. In addition to organic growth, FGS continually evaluates inorganic opportunities that could broaden its offering across service lines and geographies, it said in the report.
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