Japan-based Dentsu Inc’s cash offer to buy out Aegis Group for USD 4.9 billion created quite the buzz in the global advertising industry, and in India, on July 12, 2012. Dentsu not only ousted expected bidders such as Havas but the deal will also bring the company closer to holding companies such as Publicis Groupé and Omnicom in India. WPP and IPG are the clear top two players in India with a significant lead.
The Dentsu-Aegis deal is seen to be beneficial to both partners in India given the inherent areas of strength for the companies and the manner in which they complement each other in this market. The most important aspect to watch out for, however, is the steps Dentsu will take after the deal’s completion, which is expected to be in the fourth quarter this year, in markets such as India to foster a structure that will be geared towards driving growth.
Services, geographies, leadership: The perfect fit
On the face of it, the marriage of the two companies appears to be perfect. The global perception that Dentsu commands strength only in Japan and in none of the other markets, applies to India as well. Even though the agency has large businesses such as Honda and Canon on the back of its global relationship, Dentsu India has yet not positioned itself as a significant player for other businesses. “Dentsu has not made a dent in India,” said Ravi Rao as an industry observer. Rao is the Leader for Mindshare South Asia. He added, “Aegis has some spread even though quite a few of its Network clients are not with the agency in India, but the buyout will still allow Dentsu a wider footprint in India.”
The first outcome of the deal is bringing together a wide array of services that both companies offer. Apart from its media agencies Carat and Vizeum, Aegis has a slew of specialised divisions including OOH unit Posterscope, Brandscope, Hyperspace (Retail), Carat Fresh Integrated (Activation) and PSI (Airports). The company is well placed to strengthen Dentsu in the media services area, where at present Dentsu owns only Dentsu Media.
On the digital front, Aegis bring global brand Isobar and iProspect, a player in search and performance marketing on the table. And Dentsu adds Dentsu Digital to the mix.
In India, Aegis also has Doosra that dabbles in the creative space but given that Dentsu India Group comprises three independent, full-service advertising agencies including Dentsu Communications, Dentsu Marcom and Dentsu Creative Impact, it really is Dentsu that has any offering in the creative service area.
The second takeaway is the companies managing strength in markets such as Delhi and South. Mumbai will still be a comparatively weaker market for Dentsu - Aegis.
And finally the deal allows Dentsu to significantly add to its leadership team and skill sets in India. Dentsu Group is led by Rohit Ohri and includes names such as Divya Gupta who command respect in the Indian market. Aegis brings depth in leadership with Ashish Bhasin at its helm and leaders such as Kartik Iyer and S Yesudas, amongst others, in its top brass.
Structure and culture clash: Areas to watch out for
The biggest question facing the companies is what the final structure will look like. And the route the company takes on this front will play a critical role in defining Dentsu’s growth path in India.
For now, Dentsu and Aegis will continue to operate with the same independence that they have worked with so far. But will Dentsu eventually seek a system that makes one leader accountable for Dentsu India’s P&L (profit & loss)? If it does, who will fill that role – someone from the current leadership team or hiring another senior hand?
Another option that the companies will consider seriously is whether the two brands – Dentsu and Aegis – would be better off focussing on the capabilities they are already strong in and let go of the weaker brands in their mix. For instance, will Aegis’ Doosra be folded into Dentsu or will Dentsu Media be working closer with Aegis media service brands to leverage group synergies such as buying.
Dentsu will have to work out and make some tough calls on these counts if it intends to ensure that the buyout will give it strength in India.
Another important area that would demand attention is the possible culture clash between the two companies. Rao explained this further and said, “It would be interesting to see what happens. How the company is assimilating a culture that allows the companies to work better with each other.”
Dentsu officials have stated on numerous occasions in the past that India is a priority market for the company. This was seen when in 2011, the parent company acquired the India partner and the new Dentsu India Group became a 100 per cent subsidiary of Dentsu Inc., Tokyo. The company has spoken of bringing ‘The Dentsu Way’ in India to deliver integrated communication solutions to advertisers. This move will allow Dentsu to achieve this better but before that Dentsu has to take one more hard look at its India play and draw out a strategy for the market.