Omnicom looks to own all of TBWA India

Omnicom looks to own all of TBWA India
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First Published: Sat, Jun 07 2008. 12 01 AM IST

Final authority?TBWA India’s new CEO Shiv Sethuraman has been appointed by TBWA Worldwide
Final authority?TBWA India’s new CEO Shiv Sethuraman has been appointed by TBWA Worldwide
Updated: Sat, Jun 07 2008. 12 01 AM IST
Mumbai: The promoters of advertising agency TBWA India Ltd are in negotiations with TBWA Worldwide, part of marketing services conglomerate Omnicom Group Inc., to sell it the 49% stake in the Indian firm it doesn’t already own.
Final authority?TBWA India’s new CEO Shiv Sethuraman has been appointed by TBWA Worldwide
The transaction, which will give Omincom its first wholly owned Indian agency, will be completed soon, say people familiar with the matter, who did not wish to be identified. They added that George John, chairman of TBWA India, had just finished a successful round of talks over valuation with TBWA Worldwide executives in London.
TBWA India’s new CEO Shiv Sethuraman is a TBWA Worldwide appointment, these people said, and when he takes charge on 16 June, he could be running a wholly owned subsidiary of an international agency. Sethuraman will be reporting to Keith Smith, president (international), TBWA Worldwide and not John.
The transaction had been held up because John and other promoters were not happy with the price offered by TBWA Worldwide, the people said.
Although TBWA Worldwide holds the majority stake in TBWA India, it and its parent firm Omnicom have been keen for some time to have a wholly-owned entity in India. That might have worked to John’s advantage in the negotiations.
It hasn’t been easy for Omnicom to make inroads into the Indian market. The management of none of the local agencies in which it has a stake has been willing to transfer stake. Thus, one of its agencies, DDB Worldwide owns a mere 10% in the Anil Ambani owned Mudra Communications Pvt. Ltd. Another, BBDO Worldwide holds 50.1% in RK Swamy BBDO Pvt. Ltd. A fully-owned TBWA India would provide a base for Omnicom to officially launch global specialist units and resources and expand business here—especially globally aligned businesses.
This could also help the company strengthen OMD, Omnicom’s media specialist company here, which still does not handle media buying for Mudra or RK Swamy. A senior OMD official declined to comment on the benefits of such a move.
The chief executive of a rival advertising agency, who did not wish to be identified, said that TBWA India “is the only Omnciom agency here willing to negotiate (for complete equity sell-out)”.
“At the end of the day, it’s the aspiration of every ad holding company to get 100 per cent stake in agencies here. It gives them full control without any stumbling blocks presented by partners,” said Sam Balsara, CMD, Madison Media.
Omincom and WPP Plc., a rival marketing services conglomerate, follow different approaches to expanding in overseas markets. A brand consultant, who did not wish to be identified, said that as a group, WPP always invests in the largest, reputed and most profitable agency it can find. But Omnicom chooses to make investments in multiple mid-sized or small-sized agencies.
There are other reasons why it could make sense for TBWA Worldwide to close the deal. A person familiar with the matter said that if the deal didn’t go through, “it is unlikely that Shiv Sethuraman will be allowed to function in TBWA India as the CEO. Between George John and Shiv, who will be the final authority”?
R. Balakrishnan, chairman, Lowe India said that if the deal goes through, more investments could come TBWA India’s way. “But at the end of the day, how an agency does depends on the people managing it here,” he said.
The other reason for TBWA Worldwide’s interest is the India story, which every international network wants to be part of. “India’s a great place to be in, in terms of investment. Plus, it’s the 100 per cent season; Interpublic Group did the same recently,” said Jagdip Bakshi, CEO, Contract Advertising (India) Pvt. Ltd. Bakshi added that the other reason why holding companies consolidate their stake in agencies partially owned by them is because there are barely any stand-alone entrepreneur- driven agencies left to be bought up here.
The local agency’s creative fortunes could look up too. “TBWA Worldwide is pre-eminent amongst creative networks globally. Their stature in India is not in sync with what they are in the rest of the world. Their move to buy the remaining stake in TBWA shows they have woken up to the importance of this market,” said Mahesh Chauhan, president, Rediffusion DY&R Pvt. Ltd. He added that though the Indian promoters have done a good enough job over the years, there is this feeling that the agency could do with some fresh young blood.
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First Published: Sat, Jun 07 2008. 12 01 AM IST