Could Signal Start of U.S. Investing Spree

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SAN FRANCISCO (AdAge.com) -- Japanese advertising agency Hakuhodo has made an investment in the Los Angeles
Hakuhodo is Japan's No. 2 advertising agency.
agency Mendelsohn/Zien, according to an executive familiar with the situation.

The same source suggested the move might signal the start of a Hakuhodo campaign of investments in U.S. communications companies.

Agency representatives did not return calls at press time.

Official denial
Hakuhodo last week denied it was involved in a deal to acquire a U.S. shop. News of the investment is expected in a release to the Japanese financial press this week, according to an executive close to the situation.

Mendelsohn/Zien's clients include CKE Restaurants chains Carls Jr. and Hardees, and BMW North America, Western Region.

The agency was ranked 94th in income in the U.S. in 2002, according to the annual Advertising Age Agency Report, up from No. 133 in 2001. U.S. revenue was $17 million in 2002, up 47.6%, with $192 million in billings.

Founders retain majority ownership
Agency founders Richard Zien and Jordin Mendelsohn will remain majority owners in the shop, according to the source.

Hakuhodo, Japan's No. 2 ad agency, is trying to play catch up both internationally and at home to giant Dentsu, which is more than twice Hakuhodo's size.  Hakuhodo has made several small European acquisitions lately, in the U.K. and Germany, but more than 90% of its revenues come from Japan.  Hakuhodo's biggest need is in the U.S., where the Japanese agency's 2002 revenue from a tiny service office in New York was just $1.3 million, a 14.8% drop from the previous year.

World's 9th largest
Hakuhodo is the world's ninth-largest ad organization, sandwiched between Grey Global Group and Cordiant Communications Group, with 2002 revenue of $870 million, compared with $2 billion for No. 5 Dentsu.

At home, Hakuhodo in early April with two other top 10 Japanese agencies, Daiko Advertising and Yomiko Advertising, announced the formation of a joint holding company and media operation, Hakuhodo DY Holdings, to better compete with Dentsu in Japan.  

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Laurel Wentz contributed to this report.

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