Japanese advertising giant Dentsu has made a timely move to strengthen its position in the rapidly-growing Indian advertising market with the purchase of entrepreneur Sandeep Goyal’s 26 per cent stake in the four agencies the two partners founders founded for just ten crore ($2.17m) back in 2003.
Here’s the full report from The Economic Times.
NEW DELHI/MUMBAI: Japanese advertising company Dentsu Inc is buying out Dentsu India group chairman and CEO Sandeep Goyal’s 26% stake in its Indian arm for nearly 240 crore ($50m), a person with direct knowledge of the development said.
The deal will make Dentsu India, a seven-year-old joint venture between Goyal and Dentsu, a full-owned subsidiary of the world’s fifth largest advertising group.
Goyal will continue to be the chairman of the company, the person said.
Goyal declined to comment, while the $3-billion Dentsu did not respond to an email query.
“It could be the largest deal,”‘ an ad industry veteran said, requesting anonymity. “It is best to sell when the company is doing well.”
Goyal is cashing out at an opportune moment, after having seen his investments soar several fold. The two partners had invested just about 10 crore when they started off the venture back in 2003.
Dentsu is expected to pay Goyal 220-240 crore, which will include a fee for ceding the management control and for the businesses he brought to the company through his personal contacts, the person quoted first said.
Nearly 50% of Dentsu’s clients including Aircel, Raymond , Indiabulls , ICICI, Wipro, Acer, FedEx, DLF and Jaypee came to the company through Goyal. The agency’s globally aligned clients in India are Toyota, Honda, Suzuki, Canon and Panasonic.
Goyal’s decision to sell his stake will end Dentsu-Mogae relationship that encompassed four full service agencies – Dentsu Communications, Dentsu Marcom , Dentsu Creative Impact and Dentsu MediaTech.
“The deal is expected to be signed within next week,” a second person close to the company said.
The Goyal-Dentsu JV, many say, was a combination of contrasts and many were surprised when they came together. While Goyal was highly entrepreneurial, the more-than-100-year-old Japanese firm was a cautious behemoth. But, the combination seems to have worked well for both. Industry sources estimate Dentsu India billings at over 1,200 crore ($250m) in 2010. The company employs nearly 400 employees across its four agencies.
Goyal ventured into the corporate world even before he turned 21. His first assignment was with Goodlass Nerolac Paints, where he was in the sales department for two years. Then he moved to advertising.
Before setting up the Indian operations of Dentsu, Goyal was the group CEO of Zee Telefilms in 2001-02 and president of Rediffusion-DY&R between 1997 and 2001.
Dentsu had a stake in Rediffusion-DY&R through its global alignment with Young & Rubicam. It exited Rediffusion following a global re-alignment.
Goyal also has a string ofJVs with Astro of Malaysia for digital and mobile VAS businesses. Recently, they co-invested in a 24X7 food television channel, Food.
Dentsu’s buyout of the Indian arm is seen as a consolidation in a market that’s witnessing not just big agency groups eyeing acquisitions of local agencies, but also foreign agencies looking at setting up India operations.
In 2010, Trevor Beattie’s BMB announced a joint venture with Madison World to start BMB India .
Several independent foreign agencies like Naked, Wieden+Kennedy have also set up base in India.
By Pramugdha Mamgain & Rajiv Banerjee