Promotion agency Arc Worldwide is merging with its sister ad agency, Leo Burnett Worldwide, in a global restructuring that pushes growth in emerging markets.

Arc CEO Marc Landsberg will leave the agency in early 2007 as part of the revamp.

The combined agency will work under a single P&L. Until now, the two shops have collaborated on some work under parent Publicis Groupe, but maintained separate balance sheets. The merged agency will adopt the Leo Burnett Worldwide name as an umbrella, but Arc offices will still keep their name.

Two Burnett veterans take charge as co-presidents of the combined agency in North America. Rich Stoddart had been president of Leo Burnett USA in Chicago; Juan Carlos Ortiz had been president of Burnett in Latin America. The two also will supervise Burnett's specialty units Lapiz (Hispanic advertising) and Vigilante (urban marketing).

The only Arc exec to take a significant role will be Andrew Edwards, now president of Arc EMEA (Europe, Middle East and Africa). Edwards will oversee combined Burnett and Arc offices across several countries in that region.

Landsberg expects to remain at Arc through first-quarter 2007. He plans to pursue his own start-up venture, most likely in Chicago, when he leaves.

Landsberg said the merger doesn't put Arc in Burnett's shadow.

"The goal isn't integrating Arc into Burnett," Landsberg told PROMO. "The goal is to leverage the strength of each, to pool our resources in order to make investments in the right people and geographies and the services that our clients need the most."

Arc and Burnett will still serve clients separately, when appropriate. Arc won't change staffing on current clients' accounts, Landsberg said.

"We have a lot of legacy relationships," he said. "We want to be market relevant, not impose a new business model."

The new global structure sets up geographic offices to work differently in emerging markets, such as India and Eastern Europe, than in mature markets, such as the U.S., U.K. and France.

"It's no coincidence that the markets most important to us worldwide are the same that are our clients' key focus for profitable growth," said Burnett CEO Tom Bernardin in a statement. "Reorganizing around these new groupings will allow us to provide more hands-on direction, support and investment where it's needed, and in so doing help grow both our clients' and our own businesses."

A new global executive team will oversee the merged operations. That team is made up of Burnett execs, led by Bernardin: Mark Tutssel worldwide creative chief officer; Tom Dudreck, promoted to the new post of worldwide COO from his current title, president of multinational accounts; and Catherine Guthrie, who becomes worldwide president of multinational accounts.

Burnett also has formed a Global Management Council to advise on operations and investments in key markets. Council members include representatives from 10 markets: greater China, the Middle East, the U.S., the U.K., Iberia, Italy, France, Russia/CIS, Germany and Brazil. The council also includes a handful of global execs: Ortiz and Stoddart; Michelle Kristula-Green, who remains as president of Leo Burnett Asia Pacific; Miguel Angel Furones, president of Leo Burnett Iberia and, now, Latin America. The CEO of Publicis' media consultancy Denuo, Burnett veteran Rishad Tobaccowala, will consult with the council on future strategic initiatives.

The shift caps off a fairly quiet year for Arc after a tumultuous few years of management changes and office restructurings. Landsberg took charge in 2004. Arc ranked No. 8 in the 2006 PROMO 100 with estimated net revenues of $114.8 million for 2005, up an estimated 20% from 2003.

Industrywatchers will no doubt compare the Burnett/Arc merger to that of DraftFCB, since Arc and Draft dominate the promotion landscape in Chicago. DraftFCB made national headlines with its June merger that put the promo shop's leadership above the ad agency's. Then DraftFCB made grimmer headlines last week with the stunning loss of Wal-Mart's $570 million account (PROMO Xtra, Dec. 11, 2006).

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