Brian West, president and CEO, H&K Asia-Pacific said in a statement that changing market conditions and a shift in the global company's performance benchmarks had called into question the long-term viability of the company's Melbourne office.
H&K first entered the Melbourne market in the 1980's, via the acquisition of local shop Eric White & Associates, which was the global consultancy's first foray into Australia.
Royce is also a local shop, managed by CEO Peter Mahon and MD Richard Amos.
Melbourne is notorious for being a difficult market for international PR firms. Earlier this year, Porter Novelli Melbourne merged with boutique consumer agency PR Works, with PR Works' clients joining the PN stable.
Peter Kent, who relocated to Melbourne to head up the new operation, believes it's harder to attract clients in Melbourne. However once you've got the work to prove you are delivering results, clients tend to be more loyal. "I'm astonished by how powerful Melbourne is, it's got quite a buzz about it," he told PRWeek.
Another noted casualty is Weber Shandwick, which folded its Melbourne operations 18 months ago.
Ian Rumsby, GM and Senior VP, Weber Shandwick Sydney, said there were many lessons to be learnt. "Melbourne is a very tight-knit business community and it is essential when you are operating a PR office that you understand the depth of the relationships in the community and have a clear vision of what you are operating in that marketplace."
Michelle Hutton, former MD of H&K's Melbourne office will relocate to the Sydney office and retain her regional responsibility as senior VP and regional marcomms director, Asia-Pacific. Existing accounts are currently being divided between the Sydney office, Royce and the consultancy's 10 staff.
"We are making every effort to transition staff either through placements in Sydney, with Royce or within the H&K network," she said.
Hutton admitted it had been a tough decision, but the H&K business model had changed. "It is no longer about the number of dots you have on the map but about having key communication hubs. Melbourne has always been a difficult market."