Agency Consolidation: Dentsu Buying Aegis

dentsuJapan-based, agency holding company giant Dentsu has agreed to buy UK holding company competitor giant, Aegis, in a transaction valued at $4.9 billion (£3.2bn). The Guardian writes: "The importance of the deal to Dentsu can be seen in the sale multiple, which at 12 times earnings before interest, tax, depreciation and amortisation is more akin to what would be offered for a digital advertising business, not a traditional media operation."

This is the largest of two big deals in the agency world as WPP announced the acquisition of digital agency AKQA for $500+ million less than a month ago - acquired at a similar multiple to Dentsu/Aegis.

From the programmatic display buying world perspective, at this point, it's a bit early to know what exactly the impact will be for the combined companies. Dentsu's Ignition One platform provides programmatic services in the U.S. and originated from Dentsu's January 2010 acquisition of Innovation Interactive.

Also, Dentsu and its media rep firm CCI have a 2010-era deal with OpenX to provide a localized market called OpenX Market Japan. And in 2011, Dentsu established an exchange-like, European footprint with the purchase of Adjug.

Meanwhile, over at Aegis and led by its iProspect unit which was acquired way back when, the AMNET trading desk flourishes though hidden from view in comparison to other holding co. operations. Consolidation of programmatic demand could strengthen a trading desk's position to make deals in private marketplace or direct-to-publisher deals.

In headcount terms, Dentsu has 21,000 while Aegis has 12,000. By comparison, WPP claimed 158,000 staff; Omnicom has 65,000; Vivaki 48,000 and Interpublic Group has 42,000. With its estimated 33,000 employees post-acquisition, Dentsu will still be smaller in total staff than those four.

In a research note, Pivotal research group analyst Brian Weiser anticipates the tender offer will create new momentum for agency consolidation. He writes, "We continue to expect that Havas, Interpublic and Publicis in particular remain highly likely to become involved in some kind of 'transformative' M&A activity at some point in the next several years as well, but the specific combinations remain uncertain."

By John Ebbert

 

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