i-level, arguably the UK’s largest independent digital media agency, trended on Twitter under a week ago. It wasn’t an intriguing digital media strategy. It was its announcement of administration on Wednesday 5th May. By Friday 7th May it was in liquidation. I guess the speed of the situation took its founders by surprise; Andrew Walmsley its visionary founder was still appearing in his Marketing magazine column with the perhaps now ironic headline of “making your affiliations pay”.

The easy and wrong answer to i-levels financial problems is the loss of the COI account. The COI was £40m of its billing and 40% of the agency’s turnover. Its loss put a huge hole in the books. Yes, i-level had lots of its eggs in one basket, but agencies lose accounts on a regular basis. It is what happens in an agency world where you grow business by pitching for it.  You win some pitches….and you lose some…sometimes accounts you have.

Many years ago, I remember  coming in for a regular Monday  meeting when I was on the Exec at BMP Media.  I was  told over my coffee we’d just lost Boots as a client.  It was about 20% of our turnover. We hadn’t seen it coming.  We’d  won the Grand Prix at the Media Week awards a few months earlier for a great piece of work on Boots No7.  The procurement director – yes the procurement director – was on our agency video happy to explain how we’d helped add millions to Boots bottom line.  There was no pitch prior to the loss. There was no statutory review.  It was a deal done with Martin Sorrell.

Big accounts go in the agency world.  It’s tough luck. When it happens you move on.  The loss of Boots at the time caused issues,but it didn’t cause closure. In fact, OMD UK, which was built out from BMP Media, is now in the UK’s top 3 media agencies. It also now has Boots back as a client. It won it in 2008, this time after a pitch.

Other agencies have lost a big % of their turnover as part of agency reality.  Many survive the experience and re-emerge. Some merge or are taken over.  Yes, some may eventually close, but not so spectacularly and not so quickly as i-level did last week. Agencies above a certain size don’t close suddenly because they lose big clients. The biggest assets and costs in an agency walk in and out of the building. That means when you lose revenue, you can also cut costs and lay people off. Agencies normally close because they’ve lost momentum or drive as a business.  The reason for why the one big account left is the result of a bigger illness. This doesn’t appear to be the case with i-level.  Last year it picked up 14 accounts. Whilst other agencies talk about getting into social media, i-level set up Jam a while back. This 20 strong unit & agency within an agency  was attractive enough to be sold by the administrator to Engine on Friday. i-level may have had a big hiccup in the loss of COI, but it still had some momentum.

No, if you want to look for the reasons for i-level rapid demise, you’d be better advised to turn your eyes to football. Porstmouthwere the Premiership’s first club put into administration back in February – owing £60m.  Liverpool FC posted a £55m loss. Liverpool have a wage bill alone of over £100m.  American owners Tom Hicks and George Gillett bought Liverpool in 2007. They did so by borrowing £350m of the money from banks RBS and Wachovia. £46m of Liverpool’s loss is just the interst payment.

What sent i-level into administration and liquidation wasn’t the loss of the COI in 2009. It was how the purchase of 60% of it in 2008 by private equity firm ECI Partners was funded. Like Hicks & Gillett at Liverpool, ECI funded a large part of the purchase through borrowing £32m, a lot of that loan carried an interst rate of 12%.

The reason i-level went into administration is that none of its owners wanted to put their hand into their pockets to service the huge debt payments or to repay back the loan.  Private equity firms place bets.  Some they win and some they lose. ECI’s biggest mistake was they didn’t understand the form and odds of the market they were getting into.  I have no idea of how the founders and shareholders in i-level got paid when ECI bought its 60% stake – but the 40% left is worthless and if other elements were held in forms other than cash they maybe worthless too.

The mighty Liverpool have had a miserable year. Finishing out of the top 4, they are not in the Champions League next year.  They are making a loss, but selling Torres pays off one years debt. Portsmouth FC is in administration, but it has continued to trade.  Players are assets on the balance sheet.  As long as a club administrator can continue to cover the wage bill, he can wait to sell those assets to recover some revenue. At i-level, with the exception of the panic sale of Jam, the moment administation bit the business is dead. You don’t get the fire sale or merger. Media owners stop trading with i-level.  They are creditors and already are set to lose whatever media space bills are unpaid. Staff could stay to keep the company running, but their contracts are worthless, their monthly salaries unlikely to be honoured. So, you look for the next job. Why would any client stay in these circumstances – especially when every agency in town is calling them with an underwritten solution at a lower fee.

In football – to date –  they deduct you points, you sell players, you cut your wage bill, you fall down divisions and you try to re-build.  Leeds were in the semi-finals of the Champions League in 2003 before the £100m debt was known and they went eventually into administration. On Saturday Leeds were promoted back to the Championship (the old divison 2). At i-level, there is no relegation.  It’s just the end.