TOKYO -- Japan's No. 3 ad agency, Asatsu-DK, is set to be bought out by U.S. private equity firm Bain Capital, offering it a chance to play catch-up in the digitization and globalization that has swept the ad industry while it was in a fruitless, two-decade partnership with Britain's WPP.
Bain has acquired an 87.05% stake in Tokyo-based ADK through a successful tender offer, the companies said Thursday. The offer, announced Oct. 2, faced opposition at first from the top two stakeholders: WPP, with 25%, and asset management firm Silchester Institutional Investors. But WPP reversed course and on Nov. 21 reached an agreement with Bain to sell. ADK is expected to delist by next spring following an extraordinary shareholders meeting.
"The advertising industry is at a major turning point," Bain's Japan representative, Yuji Sugimoto, told The Nikkei Thursday. The old business model, in which ad slots are purchased from the media and filled with ads submitted by businesses, is being replaced by a new one providing wide-ranging support to client businesses' marketing efforts, according to Sugimoto.
Bain was founded by veterans of a consulting firm. It will be able to pass its marketing consultation know-how on to ADK, and has a global customer base it can draw on.
ADK may also have a chance under Bain to accelerate a mergers and acquisitions strategy that saw almost no advancement with British ad giant WPP. Bain will help ADK with such deals "if necessary," Sugimoto said.
ADK's ties to WPP largely shackled it, leaving time passing the Japanese agency by. During the roughly 20-year partnership, its bigger domestic peers -- first-place Dentsu and No. 2 Hakuhodo DY Holdings -- widened their lead over ADK. Through its 2013 purchase of U.K. agency Aegis, Dentsu brought a number of up-and-coming foreign ad companies with strong digital capabilities under its umbrella.
For the year through December 2016, ADK made 51.1 billion yen ($452 million) in gross profit, a metric widely used in the ad industry worldwide. That puts it far behind Dentsu, with 789 billion yen in the comparable period, and Hakuhodo DY, with 248.6 billion yen.