After the announcement of Japan-based Dentsu’s cash offer to buyout UK-based Aegis Media, there has been much said and written about what the deal means for the two companies in India. In a visit to the market, Nick Waters, CEO, Aegis APAC fields some of the questions, stating at the outset that it was still early to comment on the deal in any specific manner.
In conversation with exchange4media, Waters said, “It is still very early days. And truth is that there are no specific details discussed so far. Saying anything would be speculation – Dentsu has announced the offer only last week after all.”
He explained that Aegis shareholders will get a chance to vote on the deal mid-August 2012. “We can assume it would be accepted because it was a very generous offer from Dentsu,” added Waters. The deal then goes for regulatory approval, which should be reasonably simple to achieve as well. The deal will then close by the fourth quarter of the year. Following this, some more time will be invested before the structure is finalised and given shape at a market-specific level.
Waters pointed out, “Dentsu however, has made it very clear throughout the process that they are very keen to keep the existing Aegis management team together and to maintain the structure because that is what they are buying into. They are not buying us just to acquire revenue – they are buying into the strategy. Also typically, Japanese companies take long-term view to things and Dentsu may do that too. They would not be in a hurry to make changes, especially to successful operations like we have in India.”
A fantastic deal
For Waters, Dentsu is a “fantastic” deal. “And I am not just saying that because I am in a manager’s position and I feel obliged to say so. This is great for our shareholders, and very good for our people and clients. Dentsu is offering to acquire our business, because it likes the business. It is buying into our strategy, vision and mission, our management team, our client base and our momentum,” he said.
Acquiring Aegis will redistribute Dentsu’s revenue base. Waters informed that at the moment only 16 per cent of Dentsu revenue comes from outside Japan. This deal should allow that to become 40 per cent, which would be a healthy move for Dentsu. At the same time, the combined businesses’ can accelerate Aegis strategy and the company’s growth path. Also, Dentsu is a sizeable organisation with considerable firepower and the ability to invest in, and accelerate, Aegis’ strategy.
“On a global scale, this is very good for both businesses and certainly more so from APAC point of view,” said Waters.
The reported turnover for Aegis APAC is $5.7 billion and Dentsu APAC excluding Japan is $1 billion, which equals $6.7 billion. “The relation will add scale to us in a number of regions – the most notable being South Korea, Thailand, Indonesia and Taiwan. That makes the combined group more powerful in those markets with more assets. Here in India, Dentsu has a number of assets already. There is limited overlap and conflict between our two businesses. We see a great deal of complementary opportunities,” said Waters.
Of clients and employees
Aegis has a relatively small portfolio of internationally aligned businesses. Amongst those, while the likes of Philips, Air Airways, Reebok, Mattel and Deutsche Bank are handled by Aegis brands in India, the likes of Nokia never transitioned. The global win of General Motors also did not mean anything for Carat in India, as the GM India business is in a joint venture format and was not part of the pitch. On the other hand, Dentsu has very large client relations in Japan that up until now did not have the distribution network to service clients at a global level. “Aegis Media will offer that distribution network,” remarked Waters, and added, “This is part of the strategic rationale for Dentsu to acquire Aegis and facilitate them to convert clients into markets outside Japan, where up to now they have struggled. India would be amongst those markets.”
Another question is how Aegis employees have reacted to the deal. Waters replied, “I did a conference call with the management group and then the wider management group and then Jerry Buhlmann (CEO, Aegis Media) did global conference calls. The feedback is generally very positive. People initially do think about what it means for them but when you do talk about businesses as usual and Dentsu buying into us as a team and our strategy rather than just revenue, people get it. They are enthused. They know that when you put the two brands together, you have the opportunity to put two plus two equating five or more.”