Dentsu Exits Talks to Acquire AKQA

A Media and Tech Firm Said to Still Be in the Running

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A correction has been made in this story. See below for details.

NEW YORK ( -- Dentsu USA has pulled out of talks to acquire digital agency AKQA, according to one person familiar with the situation.

The U.S. branch of the Japanese ad giant withdrew from discussions because of a "huge financial difference" between the asking price of between $550 million and $600 million and what Dentsu was willing to pay, one person said.

Two parties are said to be still considering AKQA -- a media company and a tech company. The San Francisco-based agency, which is backed by private-equity firm General Atlantic, was put on the block in September.

Dentsu and AKQA did not immediately return calls seeking comment. Dentsu USA has been aggressively acquisitive over the past few years as it looks to build a presence stateside. After acquiring design firm Attik and creative agency McGarryBowen, Dentsu most recently bought Innovation Interactive, parent to digital agency 360i.

While rumors have circulated that Viacom is the media company in the mix, AKQA CEO Tom Bedecarre told Ad Age last week before Dentsu withdrew: "We are not speaking with Viacom about an investment in AKQA." Viacom declined to comment.

A price tag of $600 million would be hefty for an agency with $166 million in revenue for 2009, according to Ad Age DataCenter. That sum exceeds what Publicis Groupe paid Microsoft for Razorfish, which is the largest digital agency by U.S. revenue, according to DataCenter. Publicis acquired Razorfish for $286.8 million in cash, totaling $544 million including stock. There was also a media commitment associated with the deal.

If Viacom -- parent to MTV Networks, Nickelodeon and Comedy Central -- were indeed on the prowl to acquire an ad agency, it would make it the latest big-media company to branch out into marketing services. Print publishers Meredith Corp. and Hearst both have made surprise moves in the agency business; Meredith has picked up small agencies to build onto its custom-publishing business over the last three years, while Hearst bought digital agency iCrossing for $300 million earlier this year.

"If any media company is going to get into this business, I'd say they'd have to acquire into it," said John Zieser, Meredith's chief development officer. "They could grow it organically, but [it's] not likely."

"To sell AKQA, you would be looking for a new buyer -- one that is off the beaten path," said Seth Alpert, managing director for investment bank Ad Media Partners. "The old buyers are either unable or unwilling to pay a premium to acquire AKQA."

AKQA, which grew to more than 800 employees in 2009, today has offices in San Francisco, New York, Washington, Amsterdam, Berlin, London and Shanghai. Its revenue grew 17% in 2009 to $166 million, with $71.3 million of that figure coming from business outside of the U.S.

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CORRECTION: An earlier version of this story inaccurately stated that WPP is currently considering the acquisition of AKQA. WPP has pointed out and we accept that WPP are not currently considering making a bid to acquire AKQA. We regret any misunderstanding caused by this error.

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