Dentsu America today said it acquired Attik, a 58-person shop based in San Francisco with billings of $80 million. Attik's largest client is Toyota's Scion brand and the deal gives Dentsu full control of the Scion account with measured media of $31 million, according to TNS Media Intelligence. Dentsu America previously had the interactive portion of the business and also handles Toyota's corporate advertising.
Twelve times earnings
Neither Attik nor Dentsu executives would discuss terms, but merger-and-acquisition specialists said the deal was believed to have closed at as much as 12 times earnings, compared with the typical eight times multiple of most agency deals. "The price was outlandish," said one, adding other prospective bidders shied away from the negotiations.
One merger-and-acquisition specialist, who was not involved in the deal, said most advertising agencies are valued at five to seven times pretax earnings. But for high-growth and high-margin interactive shops, the multiple could be in the double digits, he said.
The price of interactive shops has been skyrocketing but Attik is not strictly a digital agency. It began as a design shop in 1986, literally in the attic of a house owned by the grandmother of one of the founders. The agency won Toyota Scion's account in 2002, and launched the box-shaped car the next year relying on its Gen X expertise. Its marketing efforts over the years have included everything from billboards to quirky events, such as a recent nighttime art event on Alcatraz, along with subsequent YouTube videos chronicling the evening.
In addition to Scion, Attik's U.S. clients include Boost Mobile and ExpressJet Airlines. In the U.K., it has assignments with Coca-Cola, Heineken and Adidas.
Dentsu said in a news release the acquisition is "the latest evidence of the agency's commitment to grow the Dentsu brand by attracting and acquiring top-level talent and resources."
Ric Peralta, formerly CEO of Attik, whose title will change to president, said the agency for the last two years realized that it had to do something to continue its growth. "We were too big for small clients and too small for the big clients we want to interact with," he said.
Over time, the process was one of simple elimination based on conflicts. Mr. Peralta said when he contacted Dentsu America's CEO, Tim Andree, he discovered that Attik was on Dentsu's short list for acquisition as well. The deal wrapped up within six months, he said.
Attik, now part of the newly reorganized Dentsu America, will maintain its San Francisco headquarters. Under terms of the deal, the San Francisco office will become Attik's headquarters, with Attik's Southern California offices moving into Dentsu America's Santa Monica, Calif., office, and its New York office moving into Dentsu America's Tribeca headquarters.
In addition to the Toyota business, Dentsu America, with 140 employees and U.S. billings of $140 million, also handles HarperCollins, Bandai America, Canon USA and Sage Software.
Dentsu for years stationed Japanese executives in the U.S. with the intent of snaring a piece of the Toyota account, which spent $1.2 billion in measured media in 2006 in the U.S., according to TNS Media Intelligence. The great bulk of that spending is garaged at Toyota's primary agency, Publicis Groupe's Saatchi & Saatchi, Torrance, Calif. (Dentsu owns 15% of Publicis Groupe.)
When asked whether that was enough to satisfy Dentsu, Mr. Andree, the first American CEO of Dentsu America, declined to answer. But he noted that Dentsu did not have "direct ownership" of the agency handling the Toyota brand.
Mr. Andree, a former pro basketball player, in March began to shuffle his players for what no doubt would be a major drive toward Toyota. He reorganized Dentsu's properties in New York and Southern California. Colby & Partners, Santa Monica, Calif., and a small Dentsu America media-buying shop in Marina Del Rey, Calif., were combined and renamed Dentsu America Los Angeles. Colby's New York office was combined with Dentsu's New York office.