Hakuhodo's Intended

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Big, highly touted independents like Wieden & Kennedy or Rubin Postaer & Associates were the names most frequently bandied about when agency analysts considered who might be a proper U.S. mate for Japanese shop Hakuhodo. But that's not Hakuhodo's style.

In keeping with its more recent moves in other markets, Hakuhodo chose a lesser-known, regionally centered shop. Mendelsohn/Zien Advertising, Los Angeles, was founded in 1984 by Richard Zien, president, and Jordin Mendelsohn, executive creative director. Already, the agency has interviewed two Japanese marketers working with Hakuhodo, potential clients who have not yet signed with U.S. agencies.

Over the years, Mendelsohn/Zien clients have included package-goods marketers such as Dole. Their strongest relationship, however, was with BMW North America's Western Region. Later, the agency picked up a client many in the agency business considered a headache: CKE Restaurants' Carl's Jr. Mendelsohn/Zien's perseverance-and a strategy aimed at attracting young men who are big burger consumers while not muddling the brand message by trying to appeal to too many market segments-led to the subsequent win of sibling chain Hardee's.

Mendelsohn/Zien, with 56 employees, said its 2002 billings were $210 million. According to Ad Age, it ranked 94th in income in the U.S. in 2002. U.S. revenue was $17 million in 2002, up 47.6%, with $192 million in billings.

Under terms of the deal, whose price was not disclosed, Hakuhodo took a 49.9% stake in the agency, with the remaining 50.1% split equally between Mr. Mendelsohn and Mr. Zien, who maintain control of the agency.

"Essentially, we thought it as a smart deal for both sides," Mr. Zien said. He describes his shop as business-focused consultancy with advertising capabilities. The deal is "an opportunity for us to grow in a way which is intellectually stimulating and financially rewarding for all parties," he said.

Mr. Zien said Hakuhodo can grow in the U.S. through Mendelsohn/Zien via new clients, acquisitions or new shops. Those decisions have not yet been made, he said.

But not all industry experts think the deal was the best one Hakuhodo could have made. "I don't see it as an appropriate fit," said one agency executive who has collaborated with Hakuhodo. Hakuhodo has big clients with big agency needs, yet has decided to enter the U.S. with a much smaller shop, he said. Another executive noted the volatility of the fast-food marketers and their agencies.

In any case, management at Rubin Postaer and Wieden & Kennedy repeatedly have said their shops are not for sale.

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