The Complete Story: Win-win for Dentsu,Taproot; big loss for WPP (from yesterday)

29 Aug,2012

 

By Pradyuman Maheshwari

 

So is it bigger win for Dentsu or Aggie and Paddy? Both parties, one would say. It’s not that Dentsu has no creative talent, but the Taproot India of Agnello Dias and Santosh Padhi has by far been the biggest creative story of Indian advertising in the last three years.

 

An Ogilvy, Lowe or McCann may be thriving and a Mudra has won some great awards but nothing to beat Taproot, a CxO with an international network told MxMIndia on receiving MxM’s BBM alert at 6.30 am today.

 

Agnello Dias

The news of the announcement was made to the staff on Monday and key clients have also been informed. The nitty gritty of the deal was completed last week and the announcement by Denstu was made on Tuesday morning 10am local time in Japan.

 

Although some estimates (and an Economic Times report that MxM carried as part of its syndicate arrangement) say that the deal is valued at Rs 140 crore (with Rs 60 paid immediately and Rs 80 crore in earn-outs), MxMIndia learns that this amount is exaggerated.

 

No surprises here
By Tuhina Anand 

Taproot India in many ways has rewritten the fate of independents in India. In fact, Taproot would be an excellent example of a successful brand created in such a short span of time. The credit for this goes to its co-founders Agnello Dias and Santosh Padhi who have never looked back since launching the agency in January 2009.Like any new set-up Taproot would have had its ups and downs but the message that came out to the world from the agency was clear that the work they produced were superlative and consistent. The agency has done some memorable work like Airtel’s Har Ek friend zaroori hota hai or Pepsi’s ‘change the game’ which catapulted them in the big league and bigger brands which hitherto were prerogative of bigger agencies.Taproot continued its association with the TOI Group which had managed to win India’s first grand prix at Cannes Lions led by Mr Dias when he was with JWT. At Taproot too this association with TOI got them recognition at international platform like Cannes. It was also recognized as Cannes Lions top 20 independent agencies in the world. So it seems like a simple success mantra where the duo let their work do the talking and in return created a substantial equity for their agency.

 

That Taproot decided to sell its stake doesn’t really come as a surprise as the talk was doing rounds that the founders were looking for partners. In their pursuit to get partners what probably helped was that Taproot had proved its mettle in a short span and there were prospects already willing to get a share in the agency. Then their choice of partner-Dentsu Inc- might come as a surprise initially as one would have expected an international hot shop to enter India via Taproot but if one stops to think the association seems perfectly aligned. Dentsu Inc has acquired 51 per cent stake of Taproot India.

 

Taproot gets the scale and bandwidth of Dentsu besides the moolah. In fact, the deal is just at the right time for Dentsu Inc when the Japanese major has taken full control from Sandeep Goyal and is trying to get its arithmetic right in India starting with a managerial change where Rohit Ohri, ex-JWT was roped in as the Executive Chairman forDentsu India Group and later Divya Gupta to head its media busienss.

 

For the latter, which is not really known for its creative prowess, Taproot is just the right fit as that’s the field where the agency scores highly.

 

The fact that Ohri and Dias have worked together at JWT also makes them familiar with each Other’s working style.

 

On the association, Rohit Ohri, Executive Chairman, Dentsu India Group, said, “Taproot has, very quickly, become one of the most respected communication agencies in India. In fact, Aggie and Paddy are globally recognized and celebrated creative talents. We are delighted that they have chosen to partner with Dentsu. This alliance will give a significant fillip to our growth plans for India. Our collective vision is not to be the biggest but to be the best in the industry.”

 

On how this acquisition impacts Taproot, Mr Ohri added, “Taproot’s everyday operations and management will remain unchanged. We will ensure that Taproot’s independent spirit and fiercely creative culture stays intact. It will just have a lot more firepower added through integrated communication execution capability and an all-India network.”

 

Agnello Dias, Co-Founder and Chief Creative Officer, Taproot India said, “While we are doing alright on the creative front, we felt that we needed to add a bit more logistical and service capabilities across markets. With Dentsu as our partner we feel we can scale up several areas of our operations very quickly without losing what has been working for us so far.”

 

Santosh Padhi, Co-Founder and Chief Creative Officer, Taproot India added, “Most importantly, we are assured that this alliance will be mutually beneficial to Taproot India and also to each one of its employees going forward, without changing our creative offering or the nature of the relationships we share with all our clients.”

 

Taproot India brings to Dentsu 33 full-time employees and a roster of clients that includes PepsiCo, Airtel, The Times of India, Polycab, Marico, Karbonn Mobiles,Myntra.com, Mumbai Mirror, Nirma, DSP BlackRock Mutual Fund, UTV Bindass, and UTV Stars among others.

 

A wholly owned subsidiary of Dentsu Inc., Tokyo, the Dentsu India Group comprises three standalone full-service advertising agencies-Dentsu Communications, DentsuMarcom and Dentsu Creative Impact-as well as Dentsu Media and Dentsu Digital.

 

However, in this entire celebration one question that really comes up is that for an independent who has bigger ambitions, the only way out is to become a part of a bigger network. In earlier MxM India’s conversation with industry players, some of the successful independents like Raj Kurup of Creative Land Asia and Manish Bhatt have voiced their opinion to remain solo. Mr Bhatt had explained to being open to partnerships but not a sellout. Mr Kurup had clearly stated, “I have started CLA with the prime motive of building it up, selling it definitely not in the plan.” (See: Stay solo or scale up with a biggie? http://www.mxmindia.com/2012/07/ stay-solo-or-scale-up-with-a-biggie/)

 

With Taproot’s decision to go with Dentsu, the question of staying solo or scaling up with a biggie becomes much more relevant for the independents.

 

The company is not valued above Rs 100 crore, and the amount paid to Messrs Agnello Dias and Santosh Padhi (both of who own equal stake) would be in the region of Rs 40 and 50 crore, we learn.

 

Santosh Padhi

There is an element of earn-out, but this depends entirely on the performance of the agency. So it could Rs 80, 180 or even 40 crore, is how one Dentsu insider told us after the announcement was made.

 

Big loss for WPP

There were many suitors for Taproot. While Publicis and Omnicom (via TBWA) were out of the race early, the choice was between Dentsu and WPP. In fact, MxMIndia learns that it was a decision that had to be taken by Messrs Dias and Padhi.

 

WPP sources told MxMIndia that they were taken by surprise that the deal had been inked, as they were still hopeful that Taproot would pick them.

 

So why was Dentsu chosen and not WPP, which has a huger presence in India and internationally. Ironically it’s WPP’s ‘bigness’ that’s perhaps one of the biggest reasons. While Dentsu has various arms, it is essentially one company in India, whereas WPP has various separate entities in Ogilvy, JWT, Group M and its new digital, BTL, etc interests.

 

What Taproot realised in its journey is summed by Aggie’s statement in a Dentsu release: “While we are doing alright on the creative front, we felt that we needed to add a bit more logistical and service capabilities across markets. With Dentsu as our partner we feel we can scale up several areas of our operations very quickly without losing what has been working for us so far.” And this scale could be provided by Dentsu and not WPP was the thinking. The comfort factor with Dentsu was also greater, given the opportunities to grow.

 

The likelihood of Taproot growing in the Dentsu fold is greater than it is with WPP.  There are big agencies like Ogilvy and JWT with WPP and folks like Piyush Pandey, Bobby Pawar etc who would always be centrestage and may try and pull rank given their seniority in the business. Not so with Dentsu, where even though there is talent within the India set-up, Taproot will have a star presence.

 

Rohit Ohri

Victory for Ohri, Future within Dentsu

That the acquisition happened is a big feather in the cap for Mr Rohit Ohri, Denstu India’s executive chairman. It is Mr Ohri who is said to have initiated the discussion and gave the comfort factor to the Taproot co-founders.

 

Some industry folk may remember there was a minor skirmish between Mr Ohri and Mr Dias when Taproot was awarded a Pepsi campaign and Mr Ohri was still at JWT heading Delhi operations, but all of that is history. In fact one of the main factors that Aggie and Paddy have inked the deal is the relationship with Mr Ohri.

 

It may be noted that the stake sale deal has been signed with Dentsu Inc and not Dentsu India, and the reporting is to the Board of Dentsu headquartered in Japan. The other advantage this offers is that the fortunes of Dentsu India and the vagaries of its business will not impact Taproot. So, clearly while Mr Ohri is Dentsu’s face in India, Taproot will not report to him.

 

What if?

There is a three- to five-year lock-in period for most such deals, and the arrangement with Messrs Dias and Padhi is said to be of five years. However, there are various possibilities in the future as Dentsu grows in the scale post the Aegis acquisition and India becomes a bigger play for all advertising networks. The Dentsu insider we spoke to also said one shouldn’t be surprised if either Mr Dias or Mr Padhi or both could be given bigger roles in India or internationally.

 

Since the deal helps both Taproot (scale, international network) and Dentsu (grow in India, creative powerhouse in its fold) the chances of a break-up are remote in the short and medium run, but even if there is, there will be no financial implication to monies paid out.

 

Meanwhile…

The papers are signed, the money may well be in the bank. There are no governmental clearances needed. People who do know Aggie and Paddy, as they are known in the industry, are aware that they have an easy, simple lifestyle. So don’t expect a cruise to the Bahamas or Hawaii or some such. The dosh will be well-invested. For the moment, it is getting used to being called Aggie San and Paddy San.

 

 

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