Dentsu-Aegis marriage: Pundits see blissful union, with some challenges

In this era of consolidation, the acquisition of the UK-based Aegis group by Japanese ad behemoth Dentsu has stirred a frenetic buzz.  The union is expected to afford business bliss to both partners, neither of which had been able to on its own record singular achievements in India.

The Dentsu India Group’s operations encompass three creative agencies. They are Dentsu Marcom, Dentsu Creative Impact and Dentsu Communications. The group’s media planning and buying arm is Dentsu Media and its digital forays are carried out by Dentsu Digital. As for the Aegis Group, its Indian avatar has several forms. While Carat handles media communications, Vizeum and Posterscope  are focused on out-of-home projects. The bailiwick of iProspect is search and performance marketing. Retail is within the remit of Brandscope and Hyperspace; and activations are run by Carat Fresh Integrated.  PSI is parked in the airports space and Isobar’s scope is global communications.
Adgully spoke to distinguished pundits of the ad and media worlds to determine possible outcomes of the acquisition deal. We asked Harish Bijoor, brand expert and CEO of  Harish Bijoor Consults Inc, for his views on the motivation for the marriage. “I do believe the attraction in such investments are mutual. I believe Dentsu is attracted to Aegis and Aegis is attracted to Dentsu,” Bijoor said. “I see this to be a marriage of convenience at a time when the international environment is on the boil. Agencies are looking at synergies and saying ‘why must we compete when we can do it together?’ What one witnesses in this union is a synergistic leverage on geographies of presence and verticals of competence.”
Vivek Srivastava, joint managing director of INNOCEAN Worldwide India, also cited the international climate. “Primarily, organic growth routes are getting limited and sluggish, compounded by the uncertainties on the economic front globally,” he said. “Hence acquisitions that offer a leg up in terms of skills and scale become a viable mechanism to achieve growth.”
For  Gopinath Menon   —   co-founder and CEO Melon Media of Crayons Communications Group — mergers and acquisitions are sensible antidotes to global turmoil.  “In today’s cut-throat world, acquisitions and mergers seem to be the only sensible way to grow and prosper,” he said. “It’s about marginal market share now and not only about market share alone. This incremental revenue chase is compelling stakeholders to identify different tactics to surge ahead. This recent merger seems to be in that direction. The logic seems simple for all to digest: utilize unique strengths of each partner to collectively become more dominant in the mindshare of clients, and hence depose competitors.”
The mutual benefits of the union are apparent to Jwalant Swaroop, COO (Publishing) of Lokmat Media Group. “In my opinion, it is a win-win deal for both Aegis and Dentsu,” he said. “While Aegis gets valued substantially, Dentsu gets better footprint in emerging markets like India and China along with Europe, US and the UK which have been Aegis strongholds. I find this a marriage of equals which I am sure will lead to enhanced consolidation backed by strong processes of Dentsu.”
Bijoor does not see in the pre-deal performance of the two companies in India any sort of trend for the future of the married entities.  “I believe the acquisition will help Dentsu broad-base its appeal,” he said. “Digital is a growth area of the future. This will be a focus area the new entity will want to leverage as well.” That Dentsu could not in the past expand its appeal much to non-Japanese clients, drew the following comment from  Srivastava:  “For a quantum or recognisable growth, one needs to as an organisation become a lot more outgoing in terms of outlook towards business instead of looking for specific geography-oriented clients who provide mutual cultural comfort.” He said that, unfortunately, most Japanese agencies haven’t yet broken ice of this front. “Sooner or later this cohort-driven business approach will have to open out and look at the larger world beyond with more empowered multi-cultural teams leading the process,” he said.
Menon’s views are more or less congruent with Srivastava’s. “The dissonance in my mind is of diverse cultures of the two, which are difficult to change,” Menon said. “Denstu is known for patriotism and hence the dominant share of Japanese clients irrespective of markets.” He said, on the other hand, Aegis  was more strategic in its value delivery. “So it’s a good mix but the concern could be of different  pedigreed people driving these traits and that’s the sensitivity,” he said. “I am sure this would have been analyzed and well thought out, but in trying times when the world economy is sluggish, these qualitative elements are often overlooked. History has taught us this. So on a macro-perspective front, in a year from now, a lethal combination seems to be taking shape to give a run for its money to mainly the WPP Group, but the sensitivities will lie in managing these divergent and tangential mental faculties whose priorities are unlikely to converge.”
Swaroop too dwelt on the need to explore new opportunities. “Dentsu enjoys enormous equity with Japanese clients. With Aegis in its fold, I am sure it opens the gateway to non-Japanese clients as well,” he said. “The impressive non-Japanese client portfolio of Aegis will obviously be an attractive proposition to Dentsu. Further, Aegis’s presence and competence in handling new mediums through Isobar, iProspect and Posterscope will further add value to this partnership.  Aegis also has Doosra, a creative agency and Vizeum, which will add lot of strength to Dentsu arm. This will help Dentsu in consolidating its  leadership  especially in all emerging markets including India.” He added that the impact of Dentsu and Aegis coming together may be to make the combined entity formidable as both were strong agencies and had great teams and processes.

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