In the acquisition storm swirling across the advertising world,
there are two strong currents that are pushing from below
to force change in adland: the digital might of Google, Microsoft
and their likes and the emerging high-growth markets including
compulsion to do buyout deals and outsize competitive agencies
is coming from an evil that is economic crisis. Global media
agencies are looking for safe harbours away from the slowing
advertising markets of the United States and Europe.
recession since 2008 is providing the ideal climate for these
deals to fertilise. The smaller players have become more open
to sell as they seek escape from financial stress and acquisition
prices become more affordable.
will see more mergers and acquisitions take place. In a downswing,
the values become lucrative and the benefits of consolidation
become more apparent, says Publicis South Asia CEO Nakul
BBHs of the world were born in a different era and in a different
period of history. Now is the time to build scale, volume,
value and efficiencies through size. The scramble is on to
consolidate advertising spends among the top five agencies,
much like the way the other industries behave.
long can the ad industry stay fragmented? It is the era of
consolidation at the top, says former Havas Media CEO
and now BCCL director customer strategy Anita Nayyar.
is no other way to survive the onslaught of the digital players
in a convergent media world. Agencies need to invest in digital
expertise, technology and geographies. For tapping say Google,
agencies with size will have a distinct advantage.
who knows where the ambitions of these digital giants will
end? Sitting on huge cash piles, Google, Facebook, Apple or
Microsoft may find business sense in owning media and entertainment
companies as the world moves rapidly towards convergent economies.
what if they suddenly develop the appetite to gobble up extended
areas like the agency business?
may be too much of an extended logic. It is definitely not
the reason behind the current urge of agency owners to grow
into bigger giants. Consolidation to tap deeper into clients
in a digital era is the one big pull. And in a mightier ad
world, growth can come through buyouts that provide complementary
Dentsu, overwhelmingly dependent on its revenues from the
home market, has taken one such giant leap by agreeing to
buy London-based Aegis Group for a whopping $4.9 billion.
This will enable it to fly with greater stamina in Europe,
a market it had earlier tried to dig into but failed. The
Aegis buyout will place the Tokyo-based agency in the top
position in the Asia-Pacific region while it becomes the second
largest in western Europe, the fastest growing in North America
and a global leader in digital markets.
The Japanese agency couldn't have waited longer to spread
far and wide. WPP has done a spate of acquisitions across
the world, the most recent being independent digital agency
AKQA. Publicis Groupe, on the other hand, gobbled up London-based
Bartle Bogle Hegarty (BBH) for $848.5 million. The French
agency also bought Rosetta, a digital marketing company, last
In this consolidation wave, Dentsu needed to balance
their footprint. There was an inherent strategic need,
among the bigger agencies is nowhere near completion. Havas
and the Interpublic Group could become the new targets for
acquisition as the pecking order of the top five agencies
remain unchanged even after combining Dentsu and Aegis. WPP
leads the pack, followed by Omnicom, Publicis, IPG and Dentsu.
acquisition fever has also spread to the Indian shores. The
largest takeover activity was made last year when Omnicom
snapped up majority stake in Anil Ambani's Reliance-owned
Mudra Group. The most recent acquisitions this year have been
the total buyout of digital agency Indigo Consulting by Publicis
Leo Burnett and 51 per cent of Hungama Digital by WPPs
this digital era, there is a need to offer a wider level of
specialised services. We acquired Indigo Consulting, one of
the largest digital agencies in India, says Leo Burnett
chairman and CEO for Indian subcontinent Arvind Sharma.
acquisitions across geographies are not going to end. The
cross-border deals are, in fact, going to multiply. The
big change sweeping across the world is the power of the digital
medium. In this cyclic wave, inorganic expansion is becoming
an important route. Agencies want to leapfrog their understanding
in the digital arena as consumer behaviour is changing fast.
Since digital means global platforms, we are seeing more cross-border
deals like Dentsu intending to acquire Aegis, says ZenithOptimedia
CEO Satyajit Sen.
believes that mergers and acquisitions will last for at least
a decade. The dominance of television is waning and
ad spends are moving away to digital. The market is getting
more segmented and ad models are becoming complex. Also, TV,
tablets and smart phones are merging into each other. Media
companies are acquiring specialities as digital is becoming
a powerful communication tool. Technology is driving interest
and consumer time. These require new perspectives and new
skillsets, he explains.
with a 1.2 billion demographic has become a very important
growth market for the global agencies. Commenting on S&Ps
remark about India being the first fallen angel, WPP Group
CEO Martin Sorrell told CNBC TV18's Anuradha Sengupta in an
interview that "If India is a fallen angel, I would like
to be a fallen angel."
angels are inhabiting Brazil, Russia, India and China. While
US is seeing very slow growth and Europe is caught in a debt
crisis, the BRIC countries are growing strongly though of
late they are tending to reverse their crazy pace.
believes acquisitions will keep happening in India. If 4G
turns out to be a success and the projection of 200 million
subscribers over the next five years actually happens, it
would throw open a lot of opportunities and challenges for
will see digital and special units and talent being gobbled
up. New creative shops will keep coming up and it normally
takes seven years of growth for such smaller outfits to be
a target for acquisition, he says.
Sen, Acquisitions will be on the rise. Network agencies
will have an advantage.
that signal the end of the mushrooming of independent agencies
in India? Madison Media Group CEO Gautam Kiyawat does not
think so. Creative shops can be successful without the
scale attached to it. I dont see their death in India.
They will continue to exist in numbers, he says.
advertising landscape will possibly witness two trends. While
mid-sized agencies will be buyout targets, the smaller creative
outfits will find space to exist.
feels India will not follow the global trend where the top
league will be occupied by five agencies who will dominate
the market. Being diverse in nature, India will be a 10-15
player market. Agencies with sizeable volumes like Madison
already exist. Like China, India is a volume market,
Limited joint managing director Shailendra Singh agrees that
India will have more players with strong volume business.
India is a totally different market. Percept will not
sell. Our media business, in fact, has been made the company
of the year in the Group. We are client heavy and our growth
is steady, he asserts.
consolidation wave is looked at as a healthy development by
some industry experts. The trend to break free and set
up smaller units has fragmented the market too much and clients
have gained from this. The industry needs to work with better
rates, says Nayyar.
holds a contrarian view. According to him, consolidation is
not deep or penetrative enough to push up rates. Consolidation
has not been so dramatic that it will have an impact on agency
compensations in the short run. It may slow down the drop
in agency compensations but not necessarily push them up,