How Asian Agencies Become Global Holding Companies

Agency networks based in major Asian countries like Japan, Korea and China are trying to fulfill their global aspirations by turning to Westerners for leadership and entering new regions through acquisitions. The strategy can be traced back to Dentsu, which grappled for decades with unsuccessful efforts to open agencies under its own name and forge international alliances with other networks, including Havas, Y&R and Publicis. The Japanese giant turned the corner when it made two big moves: it started acquiring Western brands instead of trying to build them, and promoted its first non-Japanese exec, Tim Andree, to a senior role in the company. Korea's Cheil Worldwide has faced similar problems trying to escape its reputation as Samsung's in-house ad agency, with no other real international clients. Following Dentsu's playbook, Cheil hired former Leo Burnett U.K. exec Bruce Haines in 2008 to move to Seoul as president-global chief operating officer, and Buz Sawyer as CEO for North America in 2010. It was announced last week that Mr. Sawyer is leaving at the end of December to become a consultant and will not be replaced. Mr. Haines retired earlier this year after having moved into a global chief strategy officer role for Cheil several years ago. (Mr. Haines' LinkedIn profile now reads "Retired and at leisure" in Bath, England). Under them, Cheil expanded in North and South America and Europe, including buying U.S. agencies Barbarian Group in 2009 and McKinney in mid-2012. With Mr. Sawyer gone, both agencies will report directly to Cheil headquarters in Seoul. Cheil's own U.S. agency, Cheil USA, was merged into the New York office McKinney opened in January 2013. A new Asian player emerged last week as Chinese PR group BlueFocus Communications bought a majority stake in London-based social media agency We Are Social. A fast learner, BlueFocus hasn't even tried to open its own offices outside China, and instead went straight into acquisition mode, starting earlier this year with a 20% stake in Huntsworth Group, a London-based PR specialist with international operations. We Are Social's founders, Robin Grant and Nathan McDonald, will stay on and drive expansion. "The intention is that we will be BlueFocus' primary digital brand outside China," Mr. Grant said. Jim Houghton, a partner at M&A specialists Results Internationals, who advised We Are Social on the deal, predicted that BlueFocus will continue to be acquisitive in the west, noting that the Chinese company has recruited an impressive team of acquisition specialists, including "North American MBA graduates." For Cheil, it's unclear what comes next. Michael Kim, its global chief operating officer, said in an email: "Our regional operations in the Americas are in better shape, in terms of leadership and creativity, largely due to the contribution that Buz has made….Regarding future M&A, which remains an important element in our long term growth plan, we are always open to partners who share our business philosophy." Cheil said in a press release that Mr. Sawyer's plans include becoming a strategic development adviser to Hyper Island. Samsung has long been the biggest client at Cheil, which started as Samsung's in-house agency. Samsung has diversified its agency roster in the U.S. over the past couple of years. Last November, a WPP team beat out incumbents Cheil and Publicis Groupe's Leo Burnett for Samsung's b-to-b business. At the time, the company also hired Razorfish to support digital (that digital account later moved to Interpublic's R/GA). Cheil Worldwide is the 16th biggest global agency company, with 2012 worldwide revenue of $597.4 million, of which $67.4 million was in the U.S., according to the Ad Age DataCenter. Dentsu Inc., ranked No. 5, generated worldwide revenue of $6.39 billion in 2012, including $735 million in the U.S. Most of Dentsu's success outside Japan came after the Japanese giant promoted Mr. Andree, who in 2008 became the first non-Japanese to be named an executive officer, a high-ranking title held by only about 20 Dentsu executives. Under Mr. Andree, whose multiple titles put him in charge of Dentsu outside Japan and give him considerable clout at Tokyo headquarters, Dentsu has bought agencies like 360i and McGarryBowen, and spent almost $5 billion to acquire Aegis Group this year. Aegis' leader Jerry Buhlmann in July became the second non-Japanese to be named an executive officer, in addition to his post as CEO of London-based Dentsu Aegis Network, which manages all of Dentsu's global business operations outside Japan and Aegis Media's operations worldwide. Contributing: Alexandra Bruell

How Asian Agencies Become Global Holding Companies

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