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Archer Malmo sells company to employees

The Daily Memphian
The Daily Memphian
 2022-07-27

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Archer Malmo, for decades the largest advertising/marketing agency in town, was sold to its employees, who will earn stock in the firm as part of a long-term retirement benefit.

The firm’s five shareholders sold their holdings in late June. The deal was final June 30 and announced with champagne toasts to the 140 employees late last week.

“This was what was best for the long term of the company,” longtime CEO Russ Williams said, citing the need to protect the firm’s independence and employee-centric culture that he said has driven its success.

“In this industry, that talent is the product,” Williams said. “It’s very collaborative. It’s all for one and one for all.”

Protecting both made the decision a “no-brainer” for company leaders, many of whom are approaching retirement.

Williams, 61, intends to remain at the helm for several more years.

“I might drop back to a non-CEO role at that juncture, but I personally plan to be around for another five to 10 years to see us through this transition to the next generation of leadership,” he said.

Other former shareholders are: Gary Backaus, chief creative & strategy officer; Gokben Yamandag, chief digital officer; Tom Barzizza, president of Archer Malmo retail group; and Jay Cooper, senior vice president and group account director.

The firm’s daily operations will not change.

The transfer was handled through an employee stock ownership plan, or ESOP, created by Congress in 1974 as part of the of Employee Retirement Income Security Act.

Employees will earn shares annually based on their level of pay. The money will accumulate in an ESOP account, similar to a 401k in that the income will be taxed when the employee leaves or retires.

“It’s long-term oriented, so, employees that stay with Archer Malmo 10, 15, 20 years have the chance to build up a pretty significant retirement account,” Williams said.

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Archer Malmo staff members take part in meeting. The firm’s five former shareholders sold their holdings in late June, and employees will earn shares just by working at the company. (Mark Weber/The Daily Memphian)

“You earn the shares simply by working in our company,” he said. “You don’t have to buy them. You don’t have to give up any salary bonus to obtain them or take on any liability.”

The news was shared late Thursday afternoon with staffers, including 20 at the Archer Malmo office in Austin, Texas, and another 20 around the nation.

“I think if anything at all, it will just improve our culture,” said Allison Chen, account supervisor & senior PR strategist. “When everyone feels like they have a piece of the pie, I think you just kind of feel that much more empowered to do great work.”

Archer Malmo will appoint a five-member board of directors. Three of the members are expected to be from the past shareholder group; Williams will be one. The other two be from outside the company.

“We will choose them carefully over the next 12 months,” Williams said.

ESOPs are growing in popularity as Baby Boom business owners retire, said Kelly Finnell, president and CEO of Executive Financial Services in Memphis, who advised Archer Malmo in the transaction.

“A lot of those people want to do something that is friendly to their employees,” he said. “I have a good friend, who was the president of a Fortune 300 company here in town. He says mergers and acquisitions are really mergers and executions.

“He saw a sale to a third party, private equity or to a competitor as a betrayal,” he said. “If you sell to an ESOP, the employee owns the company. They’re going to keep their jobs, and the jobs are going to stay in Memphis or wherever their hometown is. It just works out really well for certain companies.”

In some cases, owners are looking for ways to spread wealth in a more equitable way. ESOPs often allow shareholders to avoid long-term capital gains taxes on their portion of the business.

I think if anything at all, it will just improve our culture. When everyone feels like they have a piece of the pie, I think you just kind of feel that much more empowered to do great work.

Allison Chen,
account supervisor & senior PR strategist

At Archer Malmo, ownership through the years has been vested in five to 10 partners or shareholders, less than 10% of the firm, congregating the wealth at the top, Williams said.

“This distributes the wealth-building opportunity from a limited set of employees to all employees, and it’s designed in a very specific way to accomplish that very thing,” he said.

Before the pandemic, Finnell was doing six ESOPs a year.

“We did 10 last year, and we’re going to do at least that many this year,” he said. “We’re seeing a substantial increase.”

Archer Malmo celebrates its 70th anniversary this year. It was founded in 1952 by Ward Archer, a former newspaperman at The Commercial Appeal, who built up the business and later sold it to his son, Ward Archer Jr.

For years, there were three ad agencies in town, Ward Archer and Associates, John Malmo Advertising and Walker and Associates.

In 1991, Malmo sold his firm to Archer, making Archer Malmo the largest marketing firm in the Mid-South.

In 2001, the Archer family sold it to Williams and a handful of executives in a management buyout. Annual revenue was $8 million.

Through growth and a series of acquisitions, including a small advertising agency the firm bought in 2015 in Austin, Texas, revenue rose steadily.

In 2020, Archer Malmo posted $19 million in revenue. Last year, revenue hit $23 million.

Part of the company patina, Williams said, is its regard for its employees engendered first under Ward Archer and then Ward Archer Jr.

“The management team Ward Archer Jr. recruited and ultimately sold the company to intentionally recruited people that were the same way,” he said. “So, it’s always been a very empowering, share-the-success-of-the-company culture.”

Wally Rose, executive creative director and a 10-year employee, reiterates the focus on people and culture.

“They really put it front and center,” Rose said. “This just feels like the natural evolution. It’s funny, as natural as it seems, it still kind of took me by surprise.

“They brought this to us, it was like, oh, yes, of course,” he said. “This is how we’re going do it. This is the most Archer-Malmo thing ever.”

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