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How Dentsu Aegis Network India built a digital first holding company

Dentsu Aegis Network had a busy 2016 as it went all in for growing its portfolio with multiple mergers and acquisitions. It continued its stride in 2017 as it acquired SVG Media from the Smile Group to boost its digital capabilities. Dentsu Aegis Network India now has 35 per cent of its revenue coming from digital, and nearly 40 per cent of its 3300-strong staff is digital only.

The acquisition also marks the official launch of digital agency brand Columbus in India, now expanding the brand to nine markets in Asia Pacific.

While the financial terms of the deal were not disclosed, the SVG Media acquisition brings with it brands such as DGM, Komli and Seventynine for the network. Acquisitions have been an important part of Dentsu’s global and India growth strategy. The last five years saw the network acquire companies such as WATConsult (social media), Milestone Brandcom (outdoor), Fountainhead-MKTG (event and experiential), TapRoot (creative) and Webchutney (digital) in India.

“Acquisitions and mergers have been an important part of our strategy to keep Dentsu Aegis Network ahead of all our competitors. And we have done a successful job with this. That being said, we do not believe in acquisition for acquisition sake. For every company we have acquired, there is a larger strategy at play. Acquisitions are a strategic step rather than a financial one. Every brand we have acquired adds to our skillset,” explains Ashish Bhasin, Chairman and CEO – South Asia, Dentsu Aegis Network in a conversation with Digital Market Asia‎.

The acquisition-led strategy
While Dentsu Aegis Network has not shied away from investing in digital, as far as acquisitions are concerned, the Holding Company has followed certain guidelines to ensure that each acquisition has benefitted the company in its overall digital and diversification ambition.

“The acquisitions not only complement our existing brands but our overall offer to our clients. We look at all the prospects in a space, before we go for the one we believe best fits with our needs and our culture,” Mr Bhasin added.

Globally, the Network signed 45 deals in the financial year of 2016. Digital is key for this strategy as the network’s four focus areas include diversifying the portfolio on a global basis; evolving and expanding in the digital domain; re-engineering business processes and improving profitability. This philosophy was reflected in Dentsu Aegis Network’s move to acquire SVG Media, WATConsult and Webchutney in India.

The Holding Company’s financial results statement for 2016 reiterates the focus on acquisitions and the digital domain. It stated: “Acquisitions provide scale, capability in-fill and entrepreneurial talent to strengthen the Group’s world-class offering to its clients. With over 100 deals signed in the past three years, mergers and acquisitions has bolstered the delivery of market leading organic growth in FY2016, and will continue to be a focus in the years ahead. Digital capabilities continue to be the focus of the Groups’ M&A activity. With more than 50 per cent of the deals in FY2016 further expanding a broad suite of digital services – CRM and data, brand commerce, performance marketing among others.”

The strategy must be paying off as the Network has added some important accounts to its kitty, such as the Rs 200 crore Swedish furnishing company Ikea’s India account for Dentsu Impact. Some of its other big ticket clients across the media, creative and digital business include Maruti Suzuki, Flipkart, General Motors, Nokia, Airtel, Aditya Birla Financial Services Group, British Airways, MasterCard, Sony and Mondelez.

With the acquisition of SVG media, DAN has around 1300 people in the digital workforce out of a total of 3300 people at the network’s India branches.

Growing the digital market share
“Our market share in digital preceding this acquisition was 30 per cent, and now it is 35 per cent. This is much higher than the industry average. Our main focus has been towards becoming digital leaders and these steps take us closer to delivering on that ambition. I am certain that Columbus will help us lead forward in this direction, and assert our leadership position in digital in India,” Mr Bhasin added.

He pointed out that one of the reasons that led to Dentsu Aegis Network’s acquisition of SVG Media was the “excellent chemistry between the two teams”. He said, “There has to be a long-term relationship and SVG Columbus adds significantly to our digital ambition.”

Outlining the advantages of being a digital led company, Mr Bhasin said, “In the next three years, one fourth of the market will be digital and DAN is already a leader. Each of our segments have different focus areas, and we need to cater to all of them. We want to utilise all the skillsets we have in order to give our clients the best of our services.”

The Dentsu Group delivered total gross profit growth of 11.3 per cent in FY2016. In APAC, excluding Japan, Dentsu Aegis Network delivered a profit growth of 7.9 per cent in FY2016, including 5.6 per cent in Q4 FY2016 led by its two major markets in the region, India and Australia, who both delivered double-digit growth.