BARCELONA, Nov 19 (Reuters) - Japanese advertising agency Dentsu is not looking for any big acquisitions to spur its growth in emerging markets and digital, the head of its global operations outside Japan said on Wednesday.
“Acquisitions are not a strategy in and of themselves. They need to back up our goal and complement where we are already present,” Tim Andree, executive chairman of Dentsu Aegis Network, told the annual Morgan Stanley Technology, Media and Telecoms Conference in Barcelona.
Dentsu’s stance comes as some investors and executives, including Martin Sorrell, the head of the world’s biggest ad agency WPP, believe that another round of consolidation is brewing among advertising groups.
With the advent of online advertising agencies are competing with a wider range of companies including web giants like Google and Facebook as well as software and consulting companies like Accenture and IBM.
Customers are demanding price cuts on marketing budgets, and beginning to call into question the ad agencies’ role in media buying, or placing advertisements.
Although the top three agencies, Britain’s WPP, U.S.-based Omnicom, and France’s Publicis, have critical mass, the next rank of players, which includes Dentsu, Interpublic, and Havas may need more scale to compete in a fast-changing market, said Claudio Aspesi, analyst at Bernstein Research.
“Scale matters in the long term to get access to lower prices for media buying and more attention from tech companies,” said Aspesi.
“Dentsu will be the likely buyer: a combination of IPG and Dentsu would be big enough to be a real fourth-place challenger.”
Andree said Dentsu’s acquisition of Aegis in 2012 for $5 billion had helped the agency become a truly global player, but acknowleged that it remained “underweight” in some emerging markets such as India, Brazil, and the Philippines as well as in some technological areas like mobile.
Earlier on Wednesday Sorrell told the conference he expected to see further consolidation which was likely to involve smaller rivals Havas and Interpublic after a bigger deal between Omnicom and Publicis fell apart.
Sorrell pointed to the presence of activist hedge fund investor Elliott Management as Interpublic’s biggest shareholder as a sign that the company could be put in play and said Havas’s leading shareholder Vincent Bollore was unlikely to stand still.
Bollore Group made an offer for 51 percent of Havas in October, and already owns 36 percent of the group.
“In the agency space, I think you will see consolidation as well,” Sorrell said. “I doubt that in a few years’ time the situation will be as it is today.”
In response Interpublic’s chief executive Michael Roth played down the idea that his company would be a target.
“If it was up to Martin, then there would be one holding company,” he joked.
“We’ve had rumours about our company for years and we’ve always said the same thing. If there is an attractive offer that enhances shareholder value then we are obligated to look at it.
“But I have to tell you that all of our competitors are at this conference and so far my phone has not been ringing off the hook to invite me to dinner.” (Reporting by Leila Abboud; Editing by Greg Mahlich)