Dentsu and Aegis Group: Win-win situation

Touted as an ad giant, Dentsu is popular for managing big-ticket Japanese businesses such as Canon and Honda. However, it has not been a smooth sail for the agency when it comes to acquiring non-Japanese business in other markets in Asia, apart from America and Europe. Now, with Dentsu's acquisition of the UK-based Aegis Group, perhaps one can say that the agency is looking at a wider growth.

While it is said that on a global scale the deal brings a lot onto Dentsu's table as it gives the company access to European markets, the question is, how does it benefit in India? The buyout raises three questions.

1. Between Dentsu and Aegis, which agency benefits the most?

2. Brand Dentsu versus Brand Aegis - the current state?

3. Will the move pit Dentsu as a serious competitor now?

The companies under the Aegis Group umbrella in India are Carat (media communications specialist), Vizeum and Posterscope (out of home agencies), Brandscope and Hyperspace (retail), Carat Fresh Integrated (activation), PSI (airports), Isobar (global communications agency with digital thoughts), and iProspect (search and performance marketing).

With three different agencies managing the creative leg of the business, the media arm has been mostly left to handling Japanese clients. Hence, Dentsu will get an opportunity to strengthen its media planning and buying arm with the skill set and knowledge from the Aegis Group. The agency will further get a chance to consolidate divisions such as out of home and digital as Aegis is said to be widely recognised for services in these domains.

Sudha Natrajan, founder and director, TMC Corporation, says, "Dentsu in India has not been able to break into the non-Japanese market. And even with the Japanese clients, not as much, as these accounts are with other non-Japanese agencies. Aegis will be able to help Dentsu in this regard."

Meanwhile, in case of Aegis Media, the deal will provide an opportunity to work with significant businesses as the agency may have a long list of businesses in India, but in terms of turnover, the reality is very different.

An industry expert on condition of anonymity says, "Aegis Group is very strong in European and American markets. But in India the group is yet to win some significant businesses. It currently has clients who are typically mediocre in terms of ad spends."

Mergers and acquisitions are part of any business. While some businesses fizzle out with acquisition, some witness tremendous growth. For Dentsu, on the one hand the acquisition is a way to expand its business offering, while on the other, it also shows the desperation to move beyond its comfort zone and expand its horizon to other markets.

The acquisition will not only provide scale and volume to Dentsu - a necessity for any media business - but also give a glimpse into the agency's strategy on a global platform.

Arvind Sharma, chairman, Indian subcontinent, Leo Burnett, says, "Dentsu has a stated ambition of being a big global player outside of Japan. This development opens up a variety of options for it towards that objective. Consolidation is a long term trend in the industry. If you are not one of the top three players, things get difficult and therefore, scale becomes important. In times of economic downturn, everybody is under stress and smaller players particularly are under greater stress. I am sure that this is a happy deal for both Dentsu and Aegis."

After being in India for several years, in January 2011, Dentsu showed some serious interest in India as it acquired the remaining 26 per cent stake from the then chairman of the Dentsu India Group, Sandeep Goyal. It has taken the second step now.

From time to time, Dentsu has tried many ways to reinvent itself - tried to make its presence felt in the country. Will this move make any difference? According to Pratap Bose, CEO, DDB Mudra Group, if Dentsu is able to utilise all its resources properly and run it efficiently, then definitely the media planning and buying industry may see the rise of a new competitor soon.

Interestingly, for Shashi Sinha, CEO, Lodestar Universal, the move has already turned Dentsu into a strong competitor against already established players like WPP Group, Publicis Groupe and IPG.