LIVE ISSUE/DENTSU: Dentsu and Burnett appear to be a perfect match They could both gain from a merger. So why are they waiting, Karen Yates asks?
By KAREN YATES, campaignlive.co.uk, Friday, 18 December 1998 12:00AM
For years, global eyes have been on Dentsu, the sleeping giant of Japan. Head and shoulders above the competition in its home market, but with virtually no presence elsewhere, it was always the ’one to watch’.
For years, global eyes have been on Dentsu, the sleeping giant of
Japan. Head and shoulders above the competition in its home market, but
with virtually no presence elsewhere, it was always the ’one to
It was the agency which would have to do something - and for that read
So earlier this year, when Dentsu announced it was going to raise a pile
of cash by floating on the stock exchange, speculation began to mount
that a big deal was in the offing. But with whom? Which of our stalwart
networks was to be tossed into the jaws of Japan Inc?
Bates and Saatchi & Saatchi looked ripe for the plucking after their
demerger in 1997. Or Young & Rubicam, perhaps, with whom Dentsu had
worked for a number of years in a joint venture.
Tantalisingly, Y&R also put 25 per cent of its equity on the block this
year by partly floating on the New York Stock Exchange. But Dentsu did
not bite, except to take a few paltry shares in what it called a
Instead, Dentsu is pointing the finger at Leo Burnett. Last week it made
public the news that Dentsu’s president, Yutaka Narita, had been in
top-secret talks with Burnett’s chairman, Rick Fizdale, about the
possibility of buying a stake in the company - thought to be about 20
Both sides stressed, of course, that this was not a prelude to a
It was just talks about the ’possibility’ of investing.
Shame. It seems a nice fit. Dentsu is looking for a network which is
strong in the parts of the globe where it is weak - notably the US,
Latin America and parts of Europe. It is also seeking an agency which
reveres long-term relationships, rather than making a fast buck. A
network which can help it transplant its vast and lucrative domestic
accounts into other parts of the world.
Dentsu also needs a partner to help it understand the mysteries of media
planning and buying in the West - one which is big enough to be
knowledgeable, but small enough to want a ’big brother’ tucked away
Burnett fits the bill on all counts. First, the two agencies share key
clients such as Procter & Gamble, McDonald’s, Coca-Cola and Philip
Second, the privately owned Burnett realised last year that it needed to
spread its wings a little after a streak of bad luck saw several major
US clients walk out. Burnett - the ninth biggest network in the world -
also needs to escape the middle-ground fast, or face being squeezed out
by the big boys.
This is particularly true of media, where Burnett is openly seeking more
bulk and where talks fell through only last month with the fellow US
group, MacManus. Burnett was also rather late in recognising the
benefits of specialist advertising functions, such as below-the-line and
interactive, and would dearly like the funds to go on a buying
So Burnett, too, is looking for someone. Someone to provide cash so that
it doesn’t have to face the rigmarole of going public - or the
post-listing scrutiny. It wants a benign ’sugar daddy’. A
non-interfering sleeping partner, who would cough up and shut up, much
as Dentsu has done with CDP.
Which begs the question, what of CDP in this equation? CDP has been
billed, for the past few years at least, as the way forward for Dentsu
internationally after early attempts at expansion by the Japanese giant
failed. An earlier union between Dentsu and Y&R, for example, fell apart
everywhere except in Asia. A similar understanding, this time with the
French group, Eurocom, crumbled after only three years.
So the focus moved to London, where Dentsu had bought CDP and Travis
Sennett Sully Ross. From these bases, Dentsu believed it could
cherry-pick agencies in Europe and thus build its own network, slowly
and carefully in the time-honoured Japanese way.
But the trend towards globalisation waits for no man. Dentsu’s
snail-like growth in Europe - it still only has a handful of agencies -
is not fast enough given the pace of other mergers and the drive by
clients to work on a bigger canvas. More importantly, Japan’s
devastating recession has brought home that even the Japanese have to be
global to survive.
For now, of course, Dentsu’s big clients are defending the right to
choose their own agencies in each part of the globe. But it’s an
assertion tinged with pragmatism. Martin Sanders, the head of marketing
for Honda UK, believes there’s little pressure now to use a particular
advertising agency, but admits that things could change. ’Dentsu is a
corporate partner with Honda, and as a corporate partner it could have
an impact on the world stage in the long term,’ he says.
Sanders needn’t worry. He already uses a Dentsu agency, CDP. It’s those
brands which do not - Toyota, for example - who may have more thinking
Meanwhile, CDP is anxious to remind the world that it is still a key
player. Chris Macleod, CDP’s chief executive, says: ’Dentsu remains
totally committed to CDP and our development, both locally and
internationally.’ And Macleod promises more ’announcements’ in the new
This is what you’d expect him to say, but he’s probably right. Dentsu
has openly declared its intention to run ’two or three’ different
networks. Why not have one built up slowly and surely from a European
base, and another developed more rapidly from a US-biased strategic
This article was first published on campaignlive.co.uk
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