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Writer: Simran Sabherwal - Friday, Oct 26,2012 7:51 PM
Acquisitions increase scale, say industry leaders

The Indian advertising industry is currently pegged at Rs 35,000 crore and growing at a rate of 12-15 per cent per annum. Despite this organic growth rate, the industry has looked at acquisitions as a means of growing inorganically. But are acquisitions the right route to grow or should companies build from the ground?

The advertising industry is a divided lot on this issue. According to Arvind Sharma, Chairman, Leo Burnett, “Acquisitions are a joyous process as the company you look to acquire knows something that you want to know about.” He added that that while a decade back acquisitions was about scale, today it is for purely strategic reasons. Sharma further said that Leo Burnett strives to offer all possible skill sets to its clients, and if his organisation lacks some particular skill set, then the company would look to acquire these skill sets.

Sharma also added that the most important criteria while acquiring a company is not to look by how much your bottomline will increase, but if the acquiree wants to be with you and how as an acquirer you can contribute to building a long term value for both companies.

On the other hand, Ashish Bhasin, Chairman – India & CEO – SE Asia, Aegis Media, disagrees with Sharma on the topic of scale. He said, “The drive for acquisition is because every company looks to increase its scale. However, increasing the footprint should not affect profitability and margins.” According to Bhasin, acquisition is a strategic move and should fulfill one of the three important criteria. He elaborated that while increasing scale has benefits, it is equally important to invest and buy innovations which have the potential to be game-changers. In this way, the acquirer will be able to add more value and take the innovation to another level.

Bhasin stressed that if a company lacks a particular skill set, then it is important to acknowledge that so that the company can then go out to acquire it. He maintained that acquisitions work best when people due diligence is part of the initial check process, along with legal and financial diligence.

“Don’t look at the macro things. It is better to live by the week,” is the advice given by Agnello Dias, Co-Founder and Chief Creative Officer, TapRoot India. As is known, TapRoot India recently sold 51 per cent of its stake to Japanese advertising major Dentsu. Speaking on this acquisition, Dias said, “We valued Denstu’s digital accomplishment worldwide. We felt we were lacking in the digital space.” Dias also mentioned that another factor that played a role was the fact that creative freedom would firmly rest with TapRoot.

Arvind Sharma, Ashish Bhasin and Agnello Dias were sharing their views at the Mumbai leg of the e4m Conclave on October 23, 2012. They were speaking at the panel discussion on ‘Acquisition – Right Route to Grow’. Ranjan Kapur, Country Head - India, WPP was the Session Chairperson. The Conclave was presented by Jagran.

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