Dentsu buys DEG to strengthen data, commerce offerings

Dive Brief:

Dentsu Aegis Network has acquired the full-service digital agency DEG for a undisclosed sum, a news release announced. DEG will specifically be integrated into Dentsu's Isobar unit, but its management team will not change, with CEO Neal Sharma reporting to Deb Boyda, chief executive of Isobar's U.S. operations.
The Overland Park, Kansas-based DEG, founded in 1999, focuses on data-driven commerce solutions for platforms like Salesforce, Adobe's Magento Commerce, Sitecore and Microsoft's cloud offerings.
DEG currently names Purina, AMC Theaters, Fender, Hallmark and the luxury goods conglomerate LVMH among its clients. It retains additional offices in Denver, Pittsburgh and Des Moines, along with a satellite office in Manila.

Dive Insight:

With the purchase of DEG, Dentsu continues to push its agency offerings to be centered on commerce and data-driven services. The network's most significant move in the space came two years ago when it acquired the Baltimore-based Merkle for an estimated $1.5 billion. Dentsu has been relatively hands-off with Merkle, an approach it appears to be mirroring with DEG in preserving the company's leadership team, while also trying to wed the agency closely to its Isobar shop.

More of the major ad holding groups like Dentsu are purchasing outside agencies with expertise in data and e-commerce as these fields prove increasingly in-demand from clients, but are often complex and costly to develop in-house. IPG made waves earlier this year with the $2.3 billion purchase of Acxiom Marketing Solutions. While it's tough to tell how much the deal will buoy IPG's business, a recent client win for the global agency, American Express, had previously worked with the data-marketing arm of Acxiom on a targeting solution.

DEG carries over some high-profile clients to Isobar across a number of categories, including pet care, entertainment and retail. The agency could prove a valuable partner to Isobar and Dentsu as the demand for specialties in e-commerce is unlikely to cool next year. In a recent report, Kantar Consulting and Profitero found that 76% of surveyed brands are increasing their investments in the channel in 2019 to capitalize on what’s forecast to be a $3.5 trillion opportunity in online retail. The research found that brands will more frequently rely on third parties like agencies to apply e-commerce functions that are difficult to build in-house.

While Dentsu's M&A strategy, with deals like buying Merkle, has been viewed as savvy, the company hasn't been free from the business pressures impacting most of the major ad holding groups. In August, President and CEO Toshihiro Yamamoto announced the group was considering splitting into an operating company and a holding company, a change that would depend on shareholder approval at a meeting scheduled for March of next year, per Adweek.