Who Will Be AKQA's Next Owner?

Morgan Stanley Shops Digital Ad Agency, Rumors of Dentsu Bite

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NEW YORK (AdAge.com) -- Almost four years after General Atlantic took a majority stake in AKQA, Morgan Stanley is shopping the digital agency, according to multiple executives familiar with the matter.

The investment bank, which was also the financial adviser for the General Atlantic deal finalized in February 2007, is said to be in the process of holding meetings with potential buyers. Based on who has shown interest in purchasing large digital agencies, those buyers could include anyone from ad holding companies to publishers.

Stuart Smith, a U.K.-based blogger, late today reported that Dentsu had made a $600 million preemptive bid for the agency.

"AKQA doesn't respond to rumors," AKQA CEO Tom Bedecarre told Ad Age in a statement. "Companies are always interested in us. In the meantime, it's business as usual for AKQA and we have our hands full growing our business." Representatives for General Atlantic declined to comment, while Morgan Stanley and Dentsu did not immediately return requests for comment.

Dentsu USA, the stateside operation of the Japanese agency giant, has been highly aggressive in growing its global footprint and making agency acquisitions over the last few years. In January, Dentsu acquired Innovation Interactive, which includes digital agency 360i. The acquisition is understood to be going well.

The reported $600 million price tag is steep, exceeding what Publicis Groupe paid Microsoft for Razorfish, which is the largest digital agency by U.S. revenue per Ad Age's 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.

Greenwich, Conn.-based private equity firm General Atlantic bought a majority of AKQA around the same time the agency's previous majority owner, Francisco Partners, cashed out of its position. Francisco invested $70 million in AKQA in March 2001, according to Ad Age's DataCenter.

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. Clients it has worked with include Volkswagen, Gap Inc. and McDonald's. In late 2009 it was assigned to Unilever's first global digital roster, joining the likes of Razorfish and Havas' Euro RSCG.

When AKQA gets snapped up, that will leave just one large independent digital player, Hamilton, N.J.-based Rosetta, which has signaled it wants to make acquisitions rather than be bought. In January 360i was acquired by Dentsu and in June iCrossing was bought by publisher Hearst, after months of rumors.

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