How KircherBurkhardt and Burda have created C3. Making-of a content marketing champion
Inside the Deal
You need to activate the turbo. Immediately.
It is no longer enough just to be an agency with a long list of prizes.
To make your mark in the European digital agencies market, you need a partner. And the IEG – Investment Banking Group.
Prologue: A question of trust
YOU NEED A HUGE AMOUNT OF TRUST, to seal a deal with a handshake. Something that is often lacking in today’s business world. ”One substitute for trust is governance,” says Stefan Heilmann, Managing Director of the IEG – Investment Banking Group. Governance is like a company’s own set of rules: What is allowed? What is forbidden? As such, governance is rather more an alternative approach to trust than a close relative.
Fundamental mistrust is no basis for a partnership, which is why Lukas Kircher and Rainer Burkhardt started to search for a partner in whom they wanted to place their trust - someone who would be excited about entrepreneurial freedom and fast decisions. Someone who could embrace the new digital world and all the opportunities it offers.
And they found that partner. Kircher and Burkhardt have been the managing directors of C3 – Creative Code and Content since the beginning of 2015. Although numerous contracts were signed, sealed and delivered, this merger is also based on something else: trust.
1. THE OPPORTUNITY: Switch on the turbo - now!
THE BERLIN AGENCY KircherBurkhardt produces employees and customer magazines for companies and organisations such as the Federal Armed Forces, Deutsche Bahn, ThyssenKrupp, Vodafone, Obi and Center Parcs; initially on paper, increasingly online. This used to be called corporate publishing but is now called content marketing and describes the business of good stories, well-portioned content, from books to smartphones, from the global sales database through to the PR newsroom. If you look at which agency in Germany has won the most prizes, you will find KircherBurkhardt at the top of the list, year after year.
“Of course, as a quality leader we could have remained a boutique agency but it would have been a missed opportunity. We recognised digitalisation as an opportunity and we wanted to make the most of it. We knew that the market was growing faster than expected and that we were not able to keep pace with these developments purely based on our own resources. We needed a turbo of some kind.”Lukas Kircher
So, this is one of the highest ranking agencies - profitable and ever growing. What more could you want? “Of course, as a quality leader we could have remained a boutique agency,” says Lukas Kircher, “but it would have been a missed opportunity.” Namely, the opportunity to take off as a digital content marketing agency and shrug off the competition, and to evolve from being Germany’s content marketing pioneer into a market leader in Europe. Digital business is growing in importance. “We knew that the market was growing faster than expected and that we were not able to keep pace with these developments purely based on our own resources,” says Kircher. “We needed a turbo of some kind.”
In other words, they needed a partner who would accept that there was no way that Lukas Kircher and Rainer Burkhardt would relinquish control of the turbo. They needed a partner who was not just focussed on Germany, but had Europe within his sights.
This leap into the European champion’s league was made possible with the help of the IEG – Investment Banking Group. Heilmann and Kircher have known each other for years; the banker had invited to the agency man to join the IEG supervisory board after being impressed by Kircher’s ‘lightning-fast, structured and drastically different types of analysis.”. In autumn 2013 Kircher approached Heilmann and said “Now I need your help.”
They offer freedom and generally keep out of day-to-day business.
They focus on figures and if something goes wrong they are tough negotiation partners.
Heilmann listened for hours and asked questions; “When we offer financial advice, we need to know what it is the client actually wants, and what he doesn’t want,” says Heilmann. The first thing the banker learned was how important trust is to this client. If, after a dinner in Tim Raue’s 3-star restaurant in which all parties came together to get to know each other, Kircher’s partner Rainer Burkhardt had had reservations, IEG would not have been an option – a fact that Heilmann does not just think is a good approach, but really applauds. “The blind faith that exists between Lukas Kircher and Rainer Burkhardt is their greatest strength.”
Stefan Heilmann also learned something else at this 7 hour long dinner, namely the importance of corporate freedom to both men. If their hands are tied, be it due to corporate governance or hesitant financial investors, they simply cannot act successfully. “This was a central issue for Kircher and Burkhardt, Heilman remembers.
2. LOOKING FOR PARTNERS: Parship for companies
They focus on success. As soon as the deal has been made, they provide lots of funds very quickly.
Highly success-oriented. They also bill for their expertise as added value. This can impact on results.
IEG WENT THROUGH VARIOUS SCENARIOS WITH Kircher and Burkhardt: What kind of partner would be a good fit for the company KircherBurkhardt? What is the appeal of banks or financial investors? What are the disadvantages? What are the benefits of other agencies? What are the downsides?
“If you take a bank, for instance,” says Heilmann, “they are excellent partners when the sun is shining, and they offer a huge degree of personal freedom. But as soon as things get rough, banks turn into the most emotion-free partners you can imagine.” They could also take everything from you in a worst case scenario. In contrast, financial investors do not really opt for service providers because these are heavily influenced by the people that manage them – and also because they as a partner can contribute so little added value. “We simulated these kinds of partnerships. What happens in a crisis? How do we promote growth, in particular by buying companies abroad?” This allowed us to reject lots of options by way of a procedure of exclusion.
The content-based affinity can lead to synergies and growth possibilities.
Have all power issues been clarified? Internal culture battles can occur after mergers.
At the end of the process there were four potential partners left; one of which was BurdaCreative.
That was quite surprising: Burda, although a family-run company, is a corporate group. The Burda Media Holding is located in Munich and publishes almost 100 magazines in Germany alone including ‘Focus’ and ‘Bunte’. Internationally, it publishes around 300 magazines; however it is gradually shifting its focus to the digital world. The Burda imperium also owns the opinion portal Holidaycheck, pet articles from Zooplus and the majority of Xing. But however you look at it, Burda has a governance rather than a trust-based culture.
The Berlin company did not feel that this was a reason to rule them out: “Trust has to be earned,” says Kircher. And this is always easier if there is a certain amount of trust from the outset, and he is always ready to trust. “We believe that things will go well; and nine times out of ten they do.” And when things do not go well, governance kicks in.
“We did not have to swallow any bitter pills at Burda to make this deal happen. We want to make C3 the one-stop shop for marketing decision-makers in the content marketing field. We are already the largest content marketing agency in Europe.”Gregor Vogelsang
Kircher and Burkhardt of course know the colleagues at BurdaCreative, the Burda subsidiary responsible for Content Marketing that has earned itself a good reputation and is one of the most reputed companies in the insecurity. But do two reputed companies think the same way? Whenever a question like this arises, we all sit down with a good whisky and I listen until I have understood the motivation of the other side,” says Kircher.”
BurdaCreative’s motivation is simple: to generate more sales and profit by getting a foot in the door of this fast-growing market as quickly as possible - even if that means appointing Lukas Kircher and Rainer Burkhardt as the captains to steer the ship.
“We want to be the one-stop shop for marketing decision-makers in the content marketing field,” says Gregor Vogelsang, former managing director of BurdaCreative, when defining the goal. He sees a lot of competitors that are trying to move evolve from being content marking service providers into a digital agency. But Vogelsang believes “that we are the quickest”, especially because the new company will be independent and can make its own decisions without burdening bureaucracy.
Burda is deliberately slowing itself down and has placed the operative management of the merged company into the hands of Kircher und Burkhardt. “Putting it mildly, this is extremely unusual and highly visionary,” says Stefan Heilmann. And, as the IEG banker remembers, abolsutley unnecessary in the opinion of the legal experts and controllers at Burda. “But Burda chairman Philipp Welte made sure this was how it went.” This more than justified the initial blind faith that was placed in the deal.
3. THE PROCESS: Agreement at 4 in the morning
DESPITE ALL THIS, IT STILL TOOK A FURTHER 6 MONTHS until the contracts were signed. “We just wanted to roll up our sleeves and get on with things”, Kircher remembers. He reluctantly learned how time-consuming a merger can be. “It was very tiring sometimes, especially when there are legal experts throwing their paragraphs around the whole time,” so he just played the game ‘Civilisation’ on his iPad. It was never an option for him to skip these meetings, he always engaged in the discussions again whenever points were being addressed that he felt were fundamental. Whenever the legal experts were fighting about minute details, he simply said ‘enough, let’s move on’. “That speed things up,” says Kircher. He simply wanted to save as much time as possible.
“Even when both parties were annoyed, it just couldn’t be done any quicker,” says Heilmann. At the end of the day, contingencies needed to be made for any possibility. Just before the contract is signed, the rights and duties are defined: Who is liable for what and when? How are the shares calculated? At the latest here you find grit in the gears,” says Heilmann, “and you can be at the meeting until 4 in the morning.”
“No one wants winners and losers in a merger. What you need are partners that decide to take a joint path into the future. This is the case with C3.“Stefan Heilmann
And were people shouting at each other? No, replies Heilmann. He personally does not have a problem when things get loud: “Shouting is often a necessary release, and almost always happens. But never once throughout the entire negotiation phase did it even get a little bit louder. Gregor Vogelsang says looking back: “There were no bitter pills we had to swallow.” “What a great start,” Heilmann: “No one wants winners and losers in a merger. What you need are partners that decide to take a joint path into the future.”
Munich, Odeonsplatz: On 16th September 2014 the partners signed a contract deciding this joint future. Burda Creative and KircherBurkhardt merged into C3 Creative Code and Content. Official start: New Year’s Day 2015.
The merger was announced the next day: With an annual turnover of 59 million euros and a headcount of 400, C3 will immediately become the market, quality and innovation leader in the content marketing market and one of the top 5 digital agencies in Germany. Actually, C3 is the only digital agency that specialises in content and employs more than 100 journalists.”
At the same time the customers are being reassured: “The only thing the merger will change in terms of our business relationship is the expansion of the services available. “Your contacts at the company will remain the same.”
4. THE RESULT: The digital turbo
Our aim is to provide and execute Content Marketing worldwide.Rainer Burkhardt
WHAT HAS CHANGED SINCE THEN? Nothing decisive: The managing partners Kircher and Burkhardt still define the course that the company takes together with Gregor Vogelsang. “Our skill sets complement each other,” says Kircher. He himself champions flat-rates, Burkhardt has a head for figures and Vogelsang is a negotiation expert.
C3 now enjoys widespread acceptance as a digital agency, and is currently expanding within Europe. “We want to go one step further,” says Kircher about the company’s plans to explore options on the other side of the Atlantic. There are enough potential customers with new orders, for instance Peugeot, Siemens, Deutsche Telekom, Skoda, Fujitsu and Allianz. “We are now the largest content marketing agency in Europe,” says C3-managing director Vogelsang.
Apparently, that is only an interim stage: Since November 2016, C3 is connected with the US-market leader. „We brew with MXM a global Content Marketing Network“, says C3 managing director Rainer Burkhardt who rates this alliance as a big step for the internationalization. „Our aim is to provide and execute Content Marketing worldwide.“ This might happen: In the USA, C3 got elected as "World’s Content Marketing Agency of the Year 2016“. And, at the end of the year when all the prizes have been counted, there will be another agency at the top of the list: C3 Creative Code and Content. Year after year.
TOP 5 INSIGHTS FROM THE C3 DEAL
- BOTH PARTIES MUST WANT IT TO HAPPEN
Commitment to the merger by both parties will only come if they both recognise the sense of the merger. In the case of C3, IEG head Stefan Heilmann describes the negotiations, which dealt with huge sums of money, as extremely friendly.
- THERE MAY BE NO OUTRIGHT WINNER,
because then there are no losers. A loser would work against or even sabotage the pst-merger integration process.
- STIDY THE FIGURES. LISTEN TO YOUR GUT FEELING!
Lukas Kircher and Rainer Burkhardt took a very close look at the figures of potential partners, but ultimately based their decision of who the deal felt ‘right’ with.
- NEVER DELEGATE NEGOTIATIONS,
otherwise the bigger picture gets lost in bickering about paragraphs. Even if it is strenuous, the boss needs to participate.
- GOVERNANCE IS GOOD. TRUST IS BETTER
Regulations are necessary, but a merger that is based on mistrust or the literal meaning of the contract texts can only fail.