Corporate Aug 29, 2012
What drove Dentsu to buy 51 percent of Taproot India? A month ago, Firstpost had asked Taproot's Agnello Dias if Taproot was open to an investment by a network agency. "Never say never. If it works mutually for all parties Taproot and its clients, then it is not impossible. We have never made a single contact from our side looking for this kind of partnership. If anyone wants to have a chat, it is only civil to not say no. The important thing is that we do not 'need to' sell. We don't need rescuing, not personally or the agency.... But if there are options that make us deliver better, faster and more to our clients, which help our employees benefit and no one ends up feeling exploited, then it is fair to explore it."
Dentsu has obviously been an option that ticked the right boxes.
That's one marriage in the advertising world - and there are more in the offing.
Going beyond Taproot, who are the buyers and sellers in this race?
What makes an independent agency want to sell to a network agency? What makes them NOT want to sell? What makes a network agency want to buy or invest in an independent agency? What makes them not want to buy?
What drives entrepreneurs to either hold on to their independence or give up part or all of what they craved for?
Why are these questions being asked now? It's because the market has been alive with chatter and gossip of quiet meetings between network agency heads and independent agencies; terms like 'due diligence', 'valuation', 'term sheets' and 'multiplier' are being spouted by people who you least expect to hear them from.
All the majors who are in India -- WPP, IPG, Omnicom, Publicis and Dentsu, who closed the first of the deals, are looking around for possible relationships.
And if they're the prospective husbands, it's an unusual situation - there's a shortage of brides. Add to the shortage is the fact that the brides are in the position to decide on who they want to marry - and can command a dowry.
Let's take a look at the demand -supply situation. WPP (owner of O&M, JWT, Grey, Contract, Group M, Bates, a share in Rediffusion Y&R, etc) and IPG (owner of Lowe, draftFCB, Lodestar, McCann, etc) are in no great hurry and would buy only an agency with an extraordinary track record and potential. Publicis (owner of Saatchi & Saatchi, Publicis India, Publicis Ambience, Leo Burnett, Starcom, Zenith Optimedia, a share in BBH), thanks to disappointing performances from Saatchi & Saatchi, Publicis India and Publicis Capital, is in the hunt. Omnicom, a late entrant into India, made up for the delay in their India entry with the 100% takeover of TBWA, their stake in DDB Mudra, their increased stake in RK Swamy BBDO and the launch of BBDO India. They're hungry; they want to increase market-share faster than organic growth will allow them. Dentsu, under Rohit Ohri, wants to grow in size and spread geographically.
WPP and IPG, thanks to their solidity in India, are the least in need - and, therefore, are not active suitors.
The rest are.
What's there to buy or invest in? Who are the agencies the prospective buyers are talking to - or should be talking to?
There was Taproot, launched by Agnello Dias and Santosh Padhi, who're out of the gossip now - they're news.
There's Metal communications, launched by Narayan Kumar and Probir Dutt, (Kurien Mathews joined shortly after launch as CEO), there's Creativeland Asia, launched by Sajan Raj Kurup, there's Happy, launched by Kartik Iyer and Praveen Das, there's Law & Kenneth, launched by Praveen Kenneth, Scarecrow, launched by Vivek Suchanti, Manish Bhatt and Raghu Bhat, there's Salt, launched by Mahesh Chauhan and Beehive, launched by Sanjit Shastri.
All these agencies have proven that they've got what it takes. Each has at least one major client relationship that demonstrates reliance and trust. Between them, they handle Reliance Capital, Platinum, Berkshire Insurance, Appy, Audi, Renault, Vivel, Malaysia Tourism, Kaya, FlipKart, Myntra, part of Airtel, part of Hero Honda, to name a few.
That's an amazing client roster - all won by proof of ability, and a lot of it retained year after year after year.
Why did they decide to turn independent - and what will make them sell all or part of their company to a network? There are myriad reasons - seemingly different - but some of them are not quite unique; there's a degree of overlap.
Taproot's Agnello Dias saw this phase of his life as an experiment. "To be honest, I was not thinking about this network versus independent business at all. I just wanted to try something new from what I had been doing (creative head of an established agency) which is what it would have continued to be even if I had moved from agency to agency. I just wanted to give this a shot and see where it goes and how it feels and was quite open - almost expecting, in fact - to having to return to a job in a conventional advertising agency if it didn't work out or once I'd had my fill of experimentation."
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