Dentsu Inc. (4324), Asia’s biggest advertising company, is looking at the financial accounts of 20 potential acquisition targets to gain the technology and people it needs as customers shift to digital campaigns.
“Gaining talent and companies that have expertise in digital advertising is crucial,” Dentsu President Tadashi Ishii said in an interview in Tokyo. “We’ll continue using M&A as a means to expand.”
Dentsu is shopping for companies after paying about $4.9 billion in March for London-based Aegis Group Plc, the biggest purchase in its 112-year history. The Tokyo-based company raised about 125 billion yen ($1.3 billion) in a July share sale, including an overallotment, helped pay down debt to prepare for more acquisitions, Ishii said.
“We are in an investment phase for global expansion,” Ishii, 62, said Sept. 6. “There isn’t a specific limit” to the budget for acquisitions, he said.
Dentsu rose 3.4 percent to close at 3,620 yen in Tokyo, the highest since May 22. The gain brought the company’s advance to 57 percent this year, outperforming the 38 percent advance by Japan’s Topix index.
The advertising and media-buying agency, which started in 1901 and spun off its newswire service in 1936, reported cash and equivalents of 208 billion yen as of March 31, the highest fiscal year-end total since at least 1997, according to data compiled by Bloomberg.
The deals in Dentsu’s pipeline, subject to due diligence and negotiations of terms, would add digital operations in countries and regions including China, India, Indonesia, Brazil and Eastern Europe, Ishii said.
Dentsu has announced 12 purchases this year including an 80 percent stake in Webchutney Studio Pvt, an Indian computer graphics company, and Beijing Wonder Advertising Co., according to data compiled by Bloomberg. The company hasn’t disclosed terms of either transaction.
Worldwide revenue from e-mail marketing alone is projected to expand to $15.7 billion by 2017, led by growth in the Asia-Pacific region of more than 12 percent a year, according to estimates by researcher Global Industry Analysts Inc.
Dentsu reported a net loss of 3.7 billion yen in the three months ended June 30 because of goodwill writedowns related to the Aegis transaction, the company said Aug. 13. Sales rose 15 percent to 514 billion yen in the quarter.
The company’s buying binge is adding to consolidation in the global advertising industry. Publicis Groupe SA (PUB) in July said it agreed to buy Omnicom Group Inc. (OMC:US), a deal that would make the company the industry’s largest, surpassing WPP Plc. (WPP)
“Our peers often aim at the same targets, so I’m not sure whether half of these deals will come through,” Ishii said.
To contact the reporters on this story: Mariko Yasu in Tokyo at firstname.lastname@example.org; Grace Huang in Tokyo at email@example.com
To contact the editor responsible for this story: Michael Tighe at firstname.lastname@example.org