Dentsu must be considering withdrawing from the global stage after recording a whopping great 2024 loss of ¥125bn ($820m or £650m) after taking an impairment charge of about $1bn, essentially suggesting it overpaiad for businesses or had them down in the books as far more than they’re currently worth.
The Japanese giant now says it’s going to focus on media as part of its ‘Mid-term management plan” (MTMP)’ at the expense of CRM and, presumably, creative.
Global CEO Hiroshi Igarashi says it’s now planning to “re-evaluate our underperforming businesses and rebuild our business structure.”
To many this will herald abandoning its previous aim to be a global multi-disciplinary force competing with WPP, Public and Omnicom. In Japan it has a comprehensive hold on the media market as both buyer and seller. It expanded initially outside Japan with the acquisition of Aegis Group, owner of Carat then bought CRM specialist Merkle in an $800m deal.
So far so good but its creative efforts, commenced with Mcgarrybowen in the US, have signally failed to travel. Dentsu Creative, despite producing some good work, looks under-powered with senior execs joining and leaving at a rapid rate. Even a talented CEO in Wendy Clark, formerly Coca-Cola and then DDB, failed to last the course.
The answer surely, as CEO Igarashi implies, is to stick to what it knows best, Japan and the wider Far East with a media-based business. A question, though, is who would want to buy the other parts?
Creative-based businesses are in the books of the big holding companies at valuations they couldn’t hope to attract today. Dentsu would surely be willing to offload those outside Japan for a reasonable price, just as some WPP shareholders would bite your hand off for an offer for VML, the massive creative agency formed out of the original VML, JWT, Y&R and Wunderman. With Ogilvy it doesn’t need them.
A year of holding company restructuring, aside from the mooted Omnicom/IPG merger, looks inevitable.
