It was seven years ago that Tim Andree masterminded one of the biggest acquisitions in advertising history, when Japan’s Dentsu paid £3.2bn (or about $5bn at the time) to buy Britain’s Aegis Group in July 2012.
Now Andree, the driving force behind the deal to make Dentsu Aegis Network the international arm of Dentsu, is preparing for what he calls the "next phase of the strategy" as the Japanese parent company wants its domestic and international divisions to act more like "one Dentsu" globally.
To emphasise the shift, the company is widely expected to drop the Aegis name soon. Andree won’t confirm a rebrand but makes it clear that the business is at a watershed.
"The integration and the acquisition of ‘Dentsu Network and Aegis Media’ is over," he says.
The international operation has "succeeded wildly" since the Aegis deal, according to Andree, a genial giant who, with his imposing 6’11" frame, was a US college basketball star in his youth.
"If somebody had told me [when the deal was first done] that we would spend the next six years growing at twice the market rate and having the kind of success on all the KPIs we had, it would have been more than I dreamed for," he says.
However, Dentsu Aegis Network’s growth has slowed – organic revenue went into reverse at the start of this year – and change is required.
Andree, 58, wants to simplify the media-focused network, after making 200 acquisitions, and to invest in more creative firepower.
His priority is to win more valuable, international accounts. Although Dentsu Aegis Network employs 46,000 people and serves 89 of the world’s 100 biggest advertisers in some capacity, "we don’t have one of our clients above $100m in revenue [annually]", he admits. (An industry source estimates WPP, Omnicom and Publicis Groupe likely have more than 50 $100m-plus fee-income clients between them.)
And Andree, the youngest of 12 siblings, who grew up in Detroit and is based in New York, is in a position to shake things up, having added the chief executive’s job to his long-time role as executive chairman in January.
That followed the exit of Jerry Buhlmann, the British former chief executive of Aegis Group, who was the global chief executive of Dentsu Aegis Network from 2013 until the end of 2018 and who made sure London was its headquarters.
Over the past six years, the integration has "worked remarkably well", Andree says. "I had always taken the role of trying to be the architect of the strategy and overseer of governance and holding the group direction accountable, while Jerry was the operator and driver, along with being a partner in the strategy."
When "Jerry decided to step away", Andree, who is 18 months younger than Buhlmann, was ready to slip into the driving seat. "I don’t think the business really missed a beat," he says, despite losing an executive of Buhlmann’s "calibre".
Andree took on his bigger role as part of a wider restructure as Dentsu seeks to become "a global company that operates truly globally", as he puts it. International will no longer report through the Japanese domestic business. Instead, the two divisions will report to the parent.
"It’s going to be a much more global – and what we call a meta-national – positioning," he says.
However, Andree, who reports to Toshi Yamamoto, the president and chief executive of Dentsu, rules out other changes.
Despite the fact Andree lives in New York, the international headquarters "remains in London" where Dentsu Aegis Network is set to move into a new home by 2022. His business card gives London, not New York, as his address.
Andree adds there are no plans to appoint a new chief executive and he will hold both jobs. He has not taken on Buhlmann’s duties on an "interim" basis, he says, so hopefuls who had eyed the role face a long wait.
All this reflects the fact that Andree, the sole westerner on Dentsu’s board, is a growing force in the only Asian-owned, major agency holding company at a time when macro-economic power is shifting from west to east.
Andree was a marketer at the start of his career, working for multi-nationals, including Japanese-owned Toyota and Canon, before running marcoms for the National Basketball Association.
When he moved to Dentsu in 2006 as chief executive of its then modest US operation, revenues outside Japan contributed 3% of global turnover and it had about 20 international offices.
Now 62% comes from outside Dentsu’s home market, the group operates in 145 markets and the parent company has trebled in size from about $2.7bn to more than $8bn in annual turnover, Andree declares.
He speaks what he says is "functional" Japanese and is respectful of Dentsu’s history, which dates back to 1901 when it began as a telegraph and news service.
However, he regards the international division as a young business that has flourished because of its "lack of legacy". As Andree puts it: "It’s a 100-year-old-plus company in Japan. Outside of Japan, we’re a start-up."
He claims Dentsu Aegis Network is a more digital business than any of the other big six agency groups and even rivals concede it has done well. Sir Martin Sorrell has said he would like his new venture, S4 Capital, to be most like Dentsu of all the holding companies.
Still, the international arm has more legacy than Andree might admit after he and Buhlmann went on a buying spree, helping Dentsu to overtake WPP as the most acquisitive agency group last year, according to JEGI Clarity.
Andree maintains that Dentsu Aegis Network, whose agencies include Carat, Isobar, iProspect, Mcgarrybowen, Merkle and Vizeum, has been good at integrating acquisitions because of its one P&L structure.
However, observers say it has become difficult to navigate with more than 20 agencies in some markets, such as the UK.
Revenues dropped 0.7% in the first quarter of 2019 largely because of weakness in three markets – Australia, Brazil and the UK. The rest of Dentsu Aegis Network grew at 2.2%, Andree points out.
He has responded by appointing new leaders in the three weak markets and grouping all its agencies in five key "lines of business": creative and content; media and performance; customer experience and commerce; CRM and loyalty; and sport, entertainment and principal buying.
Andree describes the organisational design as a "beneficial, modern matrix" with agency brands executing on a local market basis and "overlaying" that with "world-class" capabilities in the five lines of business. It’s all about trying to "work the whole win-keep-and-grow paradigm", he says, using language that could apply to the basketball court as much as in the boardroom.
Andree’s rationale for developing lines of business is attracting those "larger and more significant global accounts" worth more than $100m a year in fee income. None of Dentsu Aegis Network’s current clients, which include AT&T, Diageo, General Motors, Intel, LVMH, Procter & Gamble and Microsoft, is "very dominant" because "our business is very locally driven", he says. "So the upside is very good."
Arguably part of the reason why Dentsu Aegis Network lacks large clients is that the business has been constructed in piecemeal fashion through rapid acquisition, which has led to an uneven geographical spread. There is also little overlap between Dentsu’s Japanese and international clients, which it wants to change.
Developing the lines of business is designed to raise standards and quality of service across the international operation, which must deal with the rise of global tech giants and clients in-housing some services.
Andree has also started culling agency brands, particularly in large markets such as the UK, where Dentsu X, a fledgling media network that originated in Asia, is swallowing up Fetch, 360i and ICUC. "The objective is not to eliminate brands," he insists. "The objective is to get greater alignment and world-class strategy in these core areas of competency [within the five lines of business], so we can go to market with the appropriate amount of strength and are not divided."
"Nobody sells their business any more without wanting to talk to us. We're a tough meeting. People are lining up and we say no a lot"
He plays down the suggestion that the group is suffering indigestion from so much M&A and insists the "rationalisation" of agency brands "will be based on creating value, not necessarily just trying to get conformity or consistency".
The ambition is to create a flatter, more integrated structure. "We’re not organising in a pyramid," he says. "We’re organising across our geographies and our capabilities to bring together as quickly as possible what I call a ‘teaming’ platform. Where clients have needs and where there are complimentary opportunities, the role of our business is to create value out of the assets, not necessarily hold the assets and try to squeeze just the financial performance out of them."
Andree’s boldest move in his first six months as chief executive has been to elevate creativity and appoint two creative leaders to the Dentsu Aegis Network management board – a potentially counter-intuitive move for a media-led organisation when many of its rivals have been warning that their advertising agencies are struggling.
However, Andree has seen how creative work can drive new business: "The creative element does operate at the chief marketing officer level in the C-suite and there is a much higher likelihood of being able to cross-sell other services than coming from data or coming from media alone."
He points to North America, where Dentsu’s recent media wins, such as Intel, LVMH and United Airlines, "were largely relationships that began on the creative side" with Mcgarrybowen – although some observers claim the creative shop has lost some of its lustre recently.
Andree believes investing in creativity – particularly what he calls "quick-turn, dynamic content", powered by data and personalised at scale – can help Dentsu "compete and win multi-regional or global remits" across a range of disciplines. "We’re going to scale creativity overall," he promises. "But I don’t want to build a huge, bricks-and-mortar legacy network like those our competitors are all dismantling. Don’t expect us to build our version of an Ogilvy or JWT. It’s got to be much more modern, dynamic content-related creativity."
New competitors and M&A
Andree is not alone in betting on creativity and what he calls "digital experience". Accenture Interactive, the most aggressive entrant in agency services, has embarked on a similar strategy, most recently by buying Droga5.
"When you look at what we’ve done, they may be following our acquisition strategy," Andree says, noting Dentsu Aegis Network bought Mcgarrybowen as a "tent-pole" a decade ago and has built it into a micro-network.
Accenture Interactive has more than $8.5bn in annual revenues – roughly on a par with Dentsu – and Andree acknowledges the rise of consulting and IT giants could trigger large-scale M&A: "It’s always a possibility – whether that’s the traditional holding companies trying to play a scale game or whether there will be some alignment between some of the consultancies or tech companies and the holding companies."
While Dentsu is focused on its strategy, Andree is "keeping a watchful eye on how the competitive set continues to develop". The company has an "under-leveraged balance sheet" and "headroom" to make acquisitions "if there were interesting, larger, transformative things that were happening".
He notes Dentsu Aegis Network has done two of the biggest deals in advertising, also highlighting the estimated $1.5bn acquisition of Merkle in 2016.
Andree relishes how Dentsu, the world’s fifth biggest ad group, has a seat at the top table: "Nobody sells their business any more without wanting to talk to us. When I started at Dentsu, we had a big chequebook but when I called people, I didn’t get called back. People would sometimes say, ‘Dents-who?’ Now we’re a tough meeting. People are lining up and we say no a lot."
Asia Pacific is likely to be a key region for future M&A, he suggests. Andree can afford to take "a long-term view" because that’s how the Japanese run things. "Very rarely am I ever in a position to have to think about things from a quarter or short-term perspective," he maintains.
Driven by sport
Andree, a father of six, is a cheerful presence who describes himself as a "loyal friend" and "grandfather" in his LinkedIn profile. But those who work with him say his gentle exterior should not mask the fact that this former basketball player, who competed for Notre Dame, the top Catholic university in Indiana, is highly driven.
Michael Kassan, chief executive of MediaLink, the strategic advisory firm, says: "Tim’s background in competitive sports shapes the way he deals with his teams and integrates his moves. He understands the task and the purpose of building a business through team work."
The way Andree has overseen the integration of Dentsu and Aegis and, more recently, Merkle, has been "elegant to watch", according to Kassan.
"He ticks all the boxes – high integrity, high intellect, very competitive but in a collegiate way," Kassan adds. "He doesn’t have to eat his young, he doesn’t have to eat the competition, he just has to have his head down [and stay focused]. For a 6’11" guy, he casts a particularly big shadow in the business."
Others contrast Andree’s softer people skills with the hard-driving approach of Buhlmann. "Jerry would look relentlessly at margin, profitability, client scores, new business," one insider says. "Tim will stand up in presentations and talk about family and love and team."
If rumour is to be believed, despite their long working relationship there was "real tension" between Andree and Buhlmann. Buhlmann’s exit was smooth – and he will remain an adviser to the company until the end of this year – but one old colleague is in no doubt about the power politics: "Tim beat him." Another source says: "Tim was always going to win because Tim is Dentsu."
There is plenty to do in what Andree describes as "difficult business conditions". The UK, Dentsu Aegis Network’s second biggest market after America, has been particularly troubled.
"We do well in markets when we have really strong leadership and the UK leadership in the past three years has been changed and unstable," Andree admits. "With the new leadership in place," including Euan Jarvie as UK and Ireland chief executive, "I expect that to turn around relatively quickly," he says.
Getting the Japanese and international operations to gel is a greater challenge. One person who knows the company talks about a "monopolist mindset" in Japan, where Dentsu is dominant, whereas the international business has a "scrappy", "challenger" mentality.
But there can be few people in global advertising better qualified to bridge those two cultures than Andree, who says approvingly there’s "an almost religious commitment" to client service in Dentsu’s home market. Andree sounds like a true believer in "one Dentsu".