Hakuhodo takes chunk of MML

Agencies:

Hakuhodo, Japan’s second-largest agency, has made a surprise move in acquiring a 49 per cent stake in London-based ad agency Mustoe Merriman Levy (MML) for an undisclosed sum.

Until now, Hakuhodo’s presence in the UK has been restricted to a small London office, which primarily services the UK operations of Hakuhodo’s Japanese clients, and a 50 per cent stake in Tunbridge Wells-based agency Nexus/H.

Hakuhodo’s key client in the UK is Hitachi; it also carries out work for NEC’s mobile phones division and Kobayashi Healthcare Europe. Two of Nexus/H’s biggest clients are Honda and Suzuki.

Under the terms of the agreement, Hakuhodo will transfer its existing UK business into MML. Hakuhodo’s six UK staff will move to MML, and managing director Ryoichi Katsui will become a director of MML. There will be no redundancies at either agency, and MML chairman Nick Mustoe claims that MML will retain its own internal ‘culture’.

Mustoe says that MML will gain access to the Asia-Pacific region, adding that his agency and Hakuhodo will try to build on their global relationships.

This is likely to mean that MML will try to get its hands on some of Hakuhodo’s Japanese clients, which include Sony, Canon, JAL, Honda, NEC, Disney, KFC and Coca-Cola.

Given that Nexus/H also does below-the-line work for Honda in the UK, it is likely that Hakuhodo will try to poach Honda’s £27m UK business from Wieden & Kennedy. Such an attempt would be unlikely to succeed, however, as Honda’s UK marketing operation often operates separately from its UK parent, and has only recently appointed W&K.

MML is the 34th-largest agency in the UK, with billings of £29.7m. Its clients include Kia Cars, Imperial Tobacco, Jerry’s Home Store and HP Foods.

Until now, Hakuhodo has tended to avoid large acquisitions outside Japan, and in recent years it has rejected any tie-ups with global communication groups such as IPG, Publicis and Omnicom. This year, the group has become more aggressive, picking up agencies in Australia, China and India.

Last week, Hakuhodo pushed its worldwide ranking up one position, to number eight, when it announced a tie-up with Japanese rivals Daiko Advertising and Yomiko Advertising.

Hakuhodo has indicated that it intends to float on the Tokyo Stock Exchange next year, and buying MML is part of a strategy to promote its international credentials to potential shareholders.

Past efforts by Japanese agencies to buy into the UK market do not augur well for Hakuhodo and MML. In 1990, Dentsu, Japan’s largest advertising agency, took a stake in UK agency Collett Dickenson Pearce (CDP): the UK agency went into sharp decline.

Mustoe is adamant that this venture will not succumb to the same pitfalls. He says: ‘CDP failed and Dentsu was the victim. Hakuhodo is very clear that it is buying us for who we are.’