By Jaideep Shergill
It’s finally happened! One of the last large PR firms has finally been bought out. Of course, I am referring to the acquisition of Perfect Relations by the Dentsu Aegis Network or DAN.
In a market which has seen very few acquisitions and even fewer with any long-term success rates, this announcement has suddenly brought in the anticipation of more possible deals for several other buyers and sellers out there.
Taking a step back, the marketing services industry in India has seen a bit of a stop/start phenomenon when it comes to acquisitions. There have been periods of frenzied M&A activity and then long periods of nothingness. During these feeding frenzies as I call them, we have seen WPP, Publicis and Omnicom as the three big acquirers over the last decade and a half and in more recent times, DAN has been the most aggressive of the lot. Having said this, the scale of acquisitions in India pales when compared to markets like China or even some of the Western markets including the US which still see a lot of M&A activity in the marketing services space.
Of course, there aren’t that many assets of any size worth acquiring in the India market. say my friends in the large global holding companies and based on what we are seeing in the market there are probably between five to 10 half-decent assets across creative, media, PR, digital, research and events and activation firms left in the market. The rest are either too small or past their due date. To add to this, there is a more recent trend of what I call being nationalistic and not wanting to sell out. There are at least three large (integrated) firms with revenues of INR 100 crore+ who tell me they don’t want to sell out. Rather, they want to be the acquirers and want to grow and spread their wings across geographies and capability areas. I have christened this the “BlueFocus syndromeâ€.
For those of you who don’t know the story, BlueFocus was launched in 1996 as a tech-PR firm. Based on what I could find in the public domain and from friends in the industry, here is the singular story of how this David turned into Goliath. The five founders chose the name because blue is perceived as a high-tech colour in China. Today, the firm has over 5,000 employees globally working in 100 offices in more than 10 countries. With clients ranging from Lenovo and BMW to PepsiCo and Procter & Gamble, the company has risen to become one of the top ranking communications groups in the world.
:: BlueFocus has huge ambitions. They aim to increase the revenue tenfold within 10 years. The company also wants 33% of its business to come from outside China (as of 2014)
:: About half the company’s business is digital and BlueFocus hopes to expand this to two-thirds over time. This includes social media, big data and e-commerce. Last year the firm rebranded its flagship agency, BlueFocus PR Consulting, as BlueDigital; the PR agency now ranks No. 9 in the world (according to a recent a industry trade ranking).
:: BlueFocus’ share price is about 50 times annual earnings per share, compared with about 19 for Omnicom
:: The Market cap tops $4 billion, not too far from the $4.9 billion that Dentsu Inc. paid last year for Aegis Group, at the time the biggest acquisition of a marketing services firm
:: Noted agency management consultancy R3 Worldwide was enlisted by BlueFocus to handle its U.S acquisition search
More recently, China’s financial crisis has led to a 50 per cent plunge in the BlueFocus profits despite revenue growth. The company attributed some of the losses to heavy investments in its digital businesses and other new fields which are in the early stages in terms of producing profits. BlueFocus would like to be a new type of a holding company, though it initially started out as trying to model itself on WPP.
I am all for Nationalism and supporting the idea that over a period of time, we still have some firms which are independent and can go out and conquer the world.
However, there is a lot more to be done to put our marketing services industry on the map of the world. I have my views on the what and how of this… watch this space for more in my next column.