Dentsu explores sale of operations outside Japan

Japanese advertising major Dentsu is exploring strategic options for its international business, including potential sale of a minority stake or complete divestment of its overseas operations. The company has appointed two banks, Mitsubishi UFJ Morgan Stanley and Nomura Securities, to identify potential buyers for its creative and media units outside Japan, marking a significant shift in strategy following years of financial underperformance.

According to multiple reports, Dentsu is evaluating options ranging from partial stake sales to a full exit from international markets. The Tokyo-listed group wants to finalize a strategic plan by the end of 2025, sources familiar with the matter indicated.

The potential sale affects operations built through Dentsu's 2012 acquisition of Aegis Group for £3.2 billion, which expanded the company's global footprint beyond its traditional Japanese market. The international business includes US-based digital marketing consultancy Merkle, acquired as part of subsequent expansion efforts. According to the Financial Times, which first reported the development, no formal decision has been made.

During a post-results analyst call in August, chief executive Hiroshi Igarashi acknowledged the company's international challenges without ruling out divestment. "We have been talking about the rebuilding of our international business," Igarashi stated. "We have been working on enhancing our competitiveness. Well, for this, we are going to rebuild our business foundation. We are also going to re-evaluate our underperforming business, and we are making steady progress on this."

The exploration comes amid mounting financial pressures on Dentsu's overseas operations. According to the company's latest financial results, the advertising group recorded significant goodwill impairment losses during the second quarter of 2025, with Dentsu cutting 3,400 jobs globally as international struggles intensified. The company posted an organic revenue decline of 0.2% for the first half of 2025, prompting a lowering of its full-year growth forecast from 1% to broadly flat.

Brian Wieser, principal at Madison and Wall, characterized Dentsu's ownership structure as unusual due to the complete separation between domestic and international operations. "Dentsu's ownership of [the international] business was somewhat unusual because of the complete separation between it and the domestic business and Japan's idiosyncratic isolation within the global agency industry," Wieser explained.

The leadership transition became apparent following global CEO Wendy Clark's resignation in 2022, when Dentsu announced plans to integrate its businesses. Wieser noted that the "leadership team in Japan was not generally as plugged in to the rest of the industry" following Clark's departure.

Several potential acquirers have been identified by industry analysts. Wieser pointed to Accenture Song as a likely candidate, along with "holding companies, large independents or private equity" firms. He dismissed IPG and Omnicom as potential buyers, noting they would be "focused" on their own merger, which is scheduled to conclude by the end of this year.

Dentsu's international operations have generated significant revenue but struggled with profitability. The overseas business produced over $4.5 billion in net revenues during 2024 but failed to deliver sustainable profits, leading to the comprehensive restructuring that included the announced job cuts. The company now expects to post an operating loss for the year, contrasting sharply with its domestic Japan operations, which continue to perform well.

The potential sale represents a dramatic reversal from Igarashi's previous stance. In 2023, he told Campaign that divestment was "totally not part of my mindset" and that he wasn't "thinking about anything like that." However, he had not ruled out merger opportunities if they aligned with "client-centricity" objectives.

The restructuring pressures have affected personnel across Dentsu's global operations. According to industry observers on social media, the company has been "letting go low performers in upper management and long term employees" as part of broader organizational changes. Jean-Yves Scauri, former National Head of SEO at iProspect Australia, announced his departure after 8.5 years with the company, citing the end of his chapter amid the restructuring efforts.

T-Mobile recently shifted most of its lead creative agency responsibilities away from Dentsu back in-house, according to multiple sources. This move, reported on August 28, represents another setback for the agency network's client relationships. Dentsu had won the T-Mobile account in 2024.

The financial pressures extend beyond operational losses to balance sheet considerations. According to financial reports, Dentsu carries total debt of $3.79 billion, though the company has maintained a conservative debt structure with a net debt-to-EBITDA ratio of 0.2x as of 2023, well below its medium-term target range of 1.0x to 1.5x. This low leverage provides the company with financial flexibility but also indicates underutilization of debt capacity that could have supported growth investments. The conservative debt levels become more relevant in the context of the potential sale, as they suggest the operations outside Japan could support additional leverage under new ownership, potentially making the assets more attractive to private equity buyers who typically employ higher debt levels to enhance returns.

The timing of the potential sale aligns with broader industry consolidation trends. The advertising sector has experienced significant merger and acquisition activity, with private equity firms and consulting companies expanding their presence in marketing services. The market disruption includes challenges from AI-driven marketing tools and shifting client budget allocations.

Industry speculation about potential buyers extends beyond traditional advertising holding companies. Indian agencies and business groups could represent strategic opportunities, offering long-term benefits rather than purely financial returns. For Indian players, the acquisition could accelerate global expansion, strengthen technology capabilities, and provide instant creative scale.

Reliance and Adani have been mentioned as potential dark horse candidates. For Reliance Jio, integrating a global creative and media network could complement its growing media distribution and retail ecosystem while providing end-to-end solutions to advertisers.

The technological advantages embedded in Dentsu's international portfolio, particularly through Merkle's data and performance marketing expertise, could provide significant value to acquirers. These capabilities include advanced customer relationship management systems and precision-led advertising platforms that have become essential in competing with consulting firms like Accenture, Deloitte, and PwC, which have aggressively entered the marketing services space.

Dentsu's domestic Japan business has maintained strong performance throughout the international struggles. The Japan region achieved organic revenue growth of 5.3% during the first half of 2025, marking the ninth consecutive quarter of sustained growth. This performance contrast highlights the separation between domestic success and international challenges.

The company's approach to strategic partnerships has continued despite the potential sale discussions. Dentsu expanded its Magnite partnership for CTV advertising in July 2025, deploying SpringServe platform across EMEA markets. Additionally, Criteo partnered with Dentsu for global commerce media expansion in June, integrating AI-powered commerce platforms.

The potential divestment discussion occurs as the advertising industry faces broader transformation challenges. Connected television advertising growth, retail media network fragmentation, and the deprecation of third-party cookies have created both opportunities and complications for traditional agency models.

The timeline for Dentsu's decision-making process extends through the remainder of 2025. Company leadership has indicated they will work with external advisors to evaluate strategic alternatives, including partnerships with third parties if they accelerate business recovery. The final decision will depend on market conditions, potential buyer interest, and the company's ability to implement alternative restructuring measures.

Dentsu declined to provide additional comment when approached about the banking appointments and strategic review process.

Timeline

• 2012: Dentsu acquires UK-based Aegis Group for £3.2 billion, expanding international footprint
• 2020: Dentsu drops Aegis name, consolidating international operations
• 2022: Global CEO Wendy Clark resigns; Dentsu announces business integration plans
• August 14, 2025: Dentsu reports H1 results with 0.2% organic revenue decline; company cuts 3,400 jobs globally
• August 27, 2025: Jean-Yves Scauri, National Head of SEO Australia, departs after 8.5 years
• August 28, 2025: T-Mobile shifts creative agency responsibilities away from Dentsu in-house
• September 1, 2025: Reports emerge of Dentsu exploring sale of international operations
• End of 2025: Dentsu aims to finalize strategic decision on international business

PPC Land explains

Dentsu: Founded in 1901, Dentsu Group Inc. is Japan's largest advertising company and the world's fifth-largest advertising agency network by revenue. The company has maintained a dominant position in the Japanese market while struggling to replicate that success internationally since its major overseas expansion through acquisitions beginning in 2012.

Outside Japan: Refers to Dentsu's operations beyond its domestic market, built primarily through the 2012 acquisition of UK-based Aegis Group and subsequent purchases including Merkle. These operations span Europe, the Americas, and Asia-Pacific but have consistently underperformed financially despite generating over $4.5 billion in annual revenue.

Organic revenue: A financial metric that measures company revenue growth excluding the impact of acquisitions, disposals, and foreign exchange fluctuations. Dentsu's international organic revenue declined 0.2% in the first half of 2025, indicating underlying business challenges beyond external factors.

Restructuring: The comprehensive organizational and financial overhaul Dentsu is implementing to address international business underperformance. This includes eliminating 3,400 positions globally, recording significant goodwill impairment losses, and exploring strategic alternatives including potential divestment of overseas operations.

Merkle: A US-based digital marketing consultancy specializing in data-driven customer relationship management and performance marketing. Acquired by Dentsu as part of its international expansion strategy, Merkle represents valuable technological capabilities that could attract potential buyers interested in advanced marketing automation and analytics.

Aegis Group: The UK-based advertising and media services company acquired by Dentsu in 2012 for £3.2 billion, marking the Japanese firm's major entry into global markets. The acquisition included creative agencies and media planning operations that formed the foundation of Dentsu's current international structure.

Goodwill impairment: An accounting charge that occurs when the carrying value of acquired assets exceeds their current market value. Dentsu recorded ¥86 billion in goodwill impairment losses during 2025, primarily related to its Americas and EMEA operations, signaling that previous acquisitions have not delivered expected returns.

Strategic options: The range of potential actions Dentsu is considering for its international business, from minority stake sales to complete divestment. These alternatives reflect management's acknowledgment that the current structure is not delivering adequate financial performance for shareholders.

Hiroshi Igarashi: Dentsu's president and global CEO who has overseen the company during its international challenges. His leadership has focused on strengthening the domestic Japanese business while grappling with overseas underperformance, leading to the current strategic review process.

Financial performance: The measurable business results that have driven Dentsu's strategic review, including negative organic growth, operating losses, suspended dividend payments, and significant write-downs. The stark contrast between profitable Japanese operations and struggling international business has intensified pressure for decisive action.

Summary

Who: Dentsu Group Inc., Japan's largest advertising company, led by CEO Hiroshi Igarashi. The company has hired Mitsubishi UFJ Morgan Stanley and Nomura Securities as advisors.

What: Dentsu is exploring strategic options for its international business, ranging from minority stake sales to complete divestment of overseas operations built around the 2012 Aegis acquisition.

When: The exploration was reported on September 1, 2025, with Dentsu aiming to reach a final decision by the end of 2025.

Where: The potential sale affects Dentsu's creative and media operations outside Japan, including offices across Europe, the Americas, and Asia-Pacific, as well as US-based Merkle.

Why: The international business has struggled with profitability despite generating over $4.5 billion in revenue, leading to goodwill impairment losses, job cuts affecting 3,400 employees, and a revised forecast predicting an operating loss for 2025.