There are no mad men here: Jerry Buhlmann interview
Amid the crash and burn of the Publicis-Omnicom advertising merger, the head of Aegis tells Gideon Spanier why its own, Japanese marriage is working
Saturday 21 June 2014
Jerry Buhlmann is one of Britain’s most successful advertising bosses and yet he is barely known outside the ad industry. Four years ago he became chief executive of Aegis, Britain’s second-biggest listed ad firm – at a time when it lacked direction. He turned it around by focusing on its core media- buying and digital operations and then sold the FTSE 250 group to Japan’s Dentsu for £3.2bn – a near 50 per cent premium to the share price in summer 2012.
Analysts said it was a good geographical fit as Aegis was strong outside Japan in North America, Europe and China. But they feared that there could be cultural problems with two organisations from different parts of the world.
Two years on, Mr Buhlmann remains in charge of his part of the business, renamed Dentsu Aegis Network, which is still based in London. Revenues rose by a market-leading 7.7 per cent on an organic basis last year and there have been no redundancies, he says. New clients include Burberry, British Airways and MasterCard – part of a new business haul worth over $5bn (£3bn) in billings. He has also kept expanding thorough small acquisitions, buying 17 agencies last year and 10 this.
“It’s a really a good story,” declares Mr Buhlmann at the Cannes Lions advertising festival in the French Riviera, where Dentsu Aegis Network has rented a large beachside restaurant site – although it is modest compared to Google’s giant site a few spaces away.
The apparently smooth integration of Aegis into Dentsu looks more notable given the failed attempt by France’s Publicis and America’s Omnicom to unite in what would have been an £23bn mega-merger. The collapse of that deal earlier this year means Dentsu-Aegis remains the biggest merger in advertising history.
Asked why his tie-up worked and Publicis-Omnicom failed, he says “it’s all about how you prepare”, “your integrity in the deal” and a “shared vision”.
He maintains that Dentsu Aegis has thrived because it has kept investing in new digital services, social media, content creation and automated buying. Clients want an agency that can help them innovate in an era of media “convergence”, he says, particularly as digital technology means marketing to the consumer and the transaction by the consumer are increasingly coming together. “Agencies are momentum businesses. It’s about growth, it’s not about scale. This is not a commoditising market.”
In contrast, his rivals had “misplaced strategies”, argues Mr Buhlmann. “They’ve been about scale for scale’s sake. Many of our competitors are focused on protecting what they’ve got. The merger of Aegis and Dentsu wasn’t defensive at all.”
He adds: “If the strategy of Publicis and Omnicom was that they were unhappy alone and they wanted to be together, they are now alone again. They have to restate their strategy at a time when staff morale will be tough. In the end, it is a failed strategy.”
Dentsu Aegis Network is best known for media-buying, rather than for its creative agencies, which may be part of the reason that the business has a lower profile.
Mr Buhlmann set up his own agency in 1989 and sold it to Aegis in 1999. While the Dentsu parent company is smaller than the “big three” of WPP, Publicis and Omnicom, Dentsu Aegis’s $39bn in annual billings mean it ranks third in media-buying – ahead of Omnicom – and is number one in the Asia-Pacific region. “The strategy isn’t scale,” reiterates Mr Buhlmann. “I’m not saying scale has no significance. We have to provide a much greater range of services. That is much more complex. If you have scale, you have the ability to mitigate complexity.”
The Japanese parent has been happy to keep Dentsu Aegis’s headquarters in London, near Regent’s Park, where it moved into a glossy building shortly before the takeover. Dentsu employs close to 39,000 people globally, with about 1,500 in London.
Mr Buhlmann, who travels about two weeks a month, says the capital is a good place to run a global business. “One of the major attractions is the separation between politics and business. There’s a benign, relatively attractive labour market. The economy is growing fast. There is lots of capability and talent. It’s still a talent hotbed for advertising and, increasingly, technology.”
However, London is not a place “where we have to stay forever” and he has moved the base of the creative agency Isobar, a Dentsu Aegis subsidiary, to Shanghai. Despite being British, Mr Buhlmann does not believe the network should be regarded as a British company. “I don’t think it’s important. What brings you together is your values, and they’re critical to your culture. It doesn’t matter what nationality you are.” Mr Buhlmann does not speak Japanese. “The business language of Dentsu is English.” That may be a reason why the merger was likely to work.
Clients include General Motors, 21st Century Fox, Adidas, Diageo and Coca-Cola. Mr Buhlmann singles out a recent campaign for Coke by Isobar in China as a favourite. Popular lyrics from about 50 songs were put on bottles. Then consumers could use their mobile phone to scan a lyric on to the bottle to be shared with a friend or loved one via a short clip on social media. They also got a bottle of Coca-Cola.
Mr Buhlmann’s rivals don’t want to give him or his merger partner too much credit. “Dentsu had brilliant timing,” concedes the WPP chief executive Sir Martin Sorrell, referring to how the Japanese group bought its British rival when the yen was strong in 2012, and is now reaping the benefits as the currency has weakened. But Sir Martin notes that Dentsu paid what he said was “one of the highest premiums ever” for a British takeover. “I’d fault their pricing.”
Mr Buhlmann can shrug off such criticism. “Clients can see the benefit, shareholders have seen the benefit,” he declares. “Aegis shareholders took the money and left. Dentsu shareholders have seen that the value of the business they have acquired has eliminated the premium they paid. It is delivering significant additional value and their balance sheet is as strong as it was before they acquired Aegis.”
It leaves Dentsu Aegis in a potentially strong position as many observers believe there are other big acquisitions to be done in the wake of the Publicis-Omnicom deal collapsing – whatever Mr Buhlmann may say about scale.
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