INTERNATIONAL: SPONSORED BY MOTHER TONGUE WRITERS - ISSUE/Dentsu plans to expand global networks with flotation cash/The Japanese agency will invest in a second-string agency, Karen Yates says

By KAREN YATES, campaignlive.co.uk, Friday, 30 January 1998 12:00AM

What would you do if billions of dollars suddenly came your way?

What would you do if billions of dollars suddenly came your

way?



It’s a question that Dentsu, the world’s largest advertising brand, is

happily contemplating after board members voted to take it public for

the first time. The Japanese giant will release enough cash to fund its

new headquarters in Tokyo and an expansion into digital technology,

officials say. What they are less happy to talk about is Dentsu’s third

and most important aim - the biggest agency buying spree the world has

seen.



Unlike its rivals, such as McCann-Erickson and DDB Needham, Dentsu

cannot call itself a truly global agency network. Although it bills

dollars 14 billion a year, only 15 per cent of this comes from outside

its home market.



’Our aim is to make that 30 per cent,’ Kazuo Miyakawa, the chairman of

Dentsu in Europe and the Americas, says. ’We haven’t talked about when

that time should be, but from now on it will go up to 30 per cent.’



He is careful to balance this with a polite but definite insistence that

there will be no drastic change to Dentsu’s rather stately and piecemeal

approach to expanding overseas.



But Dentsu-watchers agree that the company’s move to list is a tacit

admission that its 40-year history of desultory acquisitions hasn’t put

it on the map. So a significant share of the money will be ploughed into

an expansion drive.



One admission Dentsu does make is that it is in dire need of a second -

or a third - network.



In Japan, intense relations between client and agency, built up over

decades, are strong enough to withstand the fact that agencies often run

two or more conflicting accounts. Dentsu handles both Toyota and Honda

in Japan, a phenomenon that does not work elsewhere in the world.



’We need two networks, if not more,’ Miyakawa says. Quality of service

to existing clients is Dentsu’s top priority, he explains, and it can’t

deliver this globally through just one agency brand.



So it is tempting to think that the cash heading Dentsu’s way may be

used to snap up an unsuspecting network, despite officials protesting to

the contrary. A Bates, say, or a GGT or a Young & Rubicam.



But Miyakawa is characteristically reticent. The most important thing is

sharing the same values in individual markets, he says. It takes

time.



And it cannot be bought.



Nevertheless, pundits agree Dentsu has a lot of ground to make up if it

is determined to take on the big boys. The indisputable market leader at

home, Dentsu first put its toe in overseas waters in 1956 when it sent a

permanent representative to Honolulu.



Since then, it has tried a number of different routes to expansion: a

successful joint venture with Young & Rubicam, Dentsu Y&R, which has

delivered very well for Asia, and the liaison with the French group,

Eurocom, which fell apart after three years. In addition, Dentsu has

been quietly acquiring a variety of agencies in different countries,

such as Dentsu’s purchase of CDP in the UK.



In Europe, where Dentsu has interests in only eight or nine companies,

Miyakawa readily admits he could do with some extra muscle. Not in

London - which, he says, is more than adequately served by CDP and

Travis Sennett Sully Ross - but in France (where the network has a

regional head office but no agency), Scandinavia and Eastern Europe.



He sketches Dentsu’s dream network as a collection of successful local

agencies united into a global whole by strong core values and mutual

respect.



The suggestion is that such a chain might develop organically around,

say, CDP, while a second might include Travis Sennett.



The Americas are likely to receive the most attention. Dentsu’s approach

to them has been erratic in the past, resulting in a melange of joint

ventures and agencies that have been bought outright. Dentsu recently

bought out Y&R’s share of a Dentsu Y&R agency in Los Angeles in order to

stem losses. The renamed Rogge Effler is now on a firmer footing, says

Miyakawa, and US operations are in profit, but he admits the need to

’improve’ Dentsu’s service in the US and Latin America.



Whatever the final policy, it is likely to be at least three years

before the West witnesses any dramatic buying action from Dentsu.

Government approval for stock exchange listing in Japan takes up to

three years.



Until then, the way in which Dentsu decides to jump should give any

vulnerable networks plenty to talk about.



And Dentsu sources admit that acquiring a network is definitely one of

its options.



Edited by Karen Yates



Tel: 0171-413 4271.



This article was first published on campaignlive.co.uk

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