Dentsu Aegis Network (DAN), one of the largest agency networks in India, yesterday announced the acquisition of Happy Creative Services for an estimated Rs 200 crore. The acquisition strengthen DAN’s creative offering in the market, marks the first mcgarrybowen agency in India and expands its footprint in Asia – with other offices in Singapore, Hong Kong and China. Happy Creative Services is now called Happy mcgarrybowen.
Happy mcgarrybowen is the fifth creative agency from the network. Others include Dentsu One, Dentsu India, Dentsu Impact and Taproot Dentsu.
AdAge India caught up with Ashish Bhasin, Chairman and CEO of Dentsu Aegis Network South Asia to understand the rationale behind the acquisition and plans for DAN.
Q. What was the need to acquire Happy Creative Services? What gap does it fill in the portfolio?
I don't have mcgarrybowen in India. It is a large creative agency which started out in the US and has built a network in key places, hubs and centres in the world. Through the Happy acquisition, we are bringing in mcgarrybowen in India.
Q. Happy is strong in South India. Is the idea to strengthen the South Indian market?
We haven't acquired Happy from the South Indian perspective only. It is a fact that Happy is very strong in the South but nothing stops them from handling accounts from outside the region. They have done that in the past and as a part of business expansion, they will soon look at getting into other cities. DAN has several agencies in its portfolio and each has its own clientele, its own independent way of working and clients they target. I think, collectively, we as a group are now a significant force in the South. Not only our creative agencies, but out-of-home and digital agencies are all very strong there. It's a large sizeable operation there and this will be one more strength. Pretty soon, we should become amongst the top 2 players in the South India.
Q. You've acquired Fountainhead, Perfect Relation, WATConsult, Happy Creative Services in last two years. What is DAN's acquisition strategy?
For an acquisition to fit in, it has to fill one of the three criteria for me.
1. It could infill a capability that we didn't have. For example, we didn't have a PR company hence we acquired Perfect Relations. We didn't have a mcgarrybowen in India, so we acquired Happy and made it to mcgarrybowen.
2. We would be interested in acquisition that gives us scale. We are in this market relatively new; our competitors have been there for 92 years and 88 years. For the last 80+ years or so, the No.1 agency that came in through HTA has been WPP and the No.2 agency has been IPG. While 3,4,5 have changed, the ranking of the first two has not changed in over 80 years. DAN would become the No.2 group in India by 2017 and that would be overturning 80+ years' historical ranking. We are well on our way to getting there and we would probably get there before the end of 2017. To get there, scale becomes important since we are young here.
3. Sometimes you have people who are really innovative and have innovative products and service which is very hard to replicate by definition. It's unique. Happy and Taproot both have unique capabilities. We never look at acquisitions from a monetary point of view because ultimately the chemistry has to sink. We want people whose values are similar to the values that DAN has. To us, that is the single most important criteria.
Q. Aren't there too many acquisitions happening? Do you think that somewhere the organic growth is stagnant and this is the way to grow?
As far our growth strategy is concerned, I would like 50% of our growth to come from organic. As of the moment, more than 50% of growth is coming from organic. It started with Carat winning Nokia, Microsoft, General Motors; Vizeum winning Panasonic etc. We have won Rs 2500 Crore business in a short while. On the creative side, we won almost all of Maruti’s business through Dentsu Impact, won Ikea etc. At the moment, contrary to public perception, our organic growth is much more than acquisition-related growth. I would like it to settle at a 50-50.
Q. DAN now has Dentsu One, Dentsu Impact, Dentsu India, Taproot Dentsu and Happy mcgarrybowen? How do you help the clients differentiate these from one another?
As it so happens, most of the DAN agencies, we kind of have them focused by regions. But, that doesn’t prevent any agency to operate in other regions. It depends on the client needs and the market opportunities. Each of our agencies operate independently. Different strengths appeal to different types of clients. As far as possible, we would minimize internal competition and focus on the competition outside. But it does happen that sometimes two of our agencies land up in a pitch competing with each other.
We have grown from 50 people to 3000 people in 5-6 years and the key reason for our growth has been a one P&L model and that’s unique. When we report out of India, we don’t report out as individual agencies. We report as a network that India was deliver this and this is what India has done.
It is so stringent that if India doesn’t meet its numbers and let’s say Posterscope has done very well. Nobody will get a bonus. We have linked our destinies together and so, the qualifier is that India gets its numbers.
Q. You have 4 digital agencies in your portfolio and 5 creative agencies now. Are you looking at eventually consolidating the agencies to create one main creative and one digital agency? Or the idea is to serve conflicting clients?
We will definitely not consolidate them. They are independent agencies. Consolidating them would mitigate the whole model. We are like a group of expert companies. In the marketing communication space, if a client has any needs, DAN should be able to provide it. If one looks at digital, while we have four agencies, each has a different focus and specialist skills while they can provide all digital solutions. For instance, iProspect is a search performance agency, WATConsult has a social media focus. It also allows the agencies to handle conflicting clients.
Q. What are the plans for Happy for the coming year?
The first thing is to get the integration with mcgarrybowen going. Bring in mcgarrybowen to India which I am hoping should happen either by end of this year or first quarter of the next year. With their help, we will also target clients, which may be their global clients but we don’t have them in our group in India. We will go after those clients. There is a lot of learning that needs to happen. Mcgarrybowen is a hugely successful agency in the US. We need to learn their way of working and planning process.
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Q. You are strong in the North and the West region in India, are now strengthening in the South. Are there similar plans for the East market?
Many of our agencies are handling businesses in the East. We also have an office in Kolkata. These are all driven by business needs. East is a very different market. We are in the business of providing the best possible service to our clients. Wherever there is an opportunity, we will be there. East is definitely on our radar for some of our businesses but it does not make sense for all our businesses.