Montreal-based ad agency Sid Lee, whose clients in Canada include Absolut, has been aquired by Japan’s Hakuhodo.Chris Ratcliffe/Bloomberg
Another independent Canadian ad agency has sold to a global holding company, in a bid for the kind of broader worldwide presence many large marketers are now demanding.
On Monday, Montreal-based agency Sid Lee announced it has been acquired by Hakuhodo DY Holdings, a 120-year old firm based in Tokyo, and the second-largest holding company of PR, advertising and communications firms in that country behind Dentsu Inc.
The deal closed on Monday. Financial terms were not disclosed.
Sid Lee, which handles advertising for such brands as Absolut Vodka, the Toronto Raptors, Intel and Unilever's Axe brand in Canada, will continue to operate under its own moniker.
The deal is intended to give Hakuhodo a presence in North America and Western Europe to extend its services to clients such as Toshiba and Nissan. For Sid Lee, it is a chance to get a foothold in the coveted Asian market.
"Our goal is to serve clients globally. Our clients are asking it from us," Sid Lee chairman Bertrand Cesvet said in an interview Monday. "There are some RFPs [requests for proposals, which invite agencies to pitch for a marketer's business] where not being in Asia is a non-starter."
This has been a tension for some other independent advertising firms, which boast creative chops but cannot promise the kind of worldwide reach of their brethren who are owned by multinational holding companies.
In December, Quebec City-based Vision7 International, which owns longstanding Canadian ad agency Cossette, sold an 85-per-cent stake in its North American assets to Chinese public relations giant BlueFocus Communications Group for $210-million (U.S.)
In 2013, Toronto agency John St. was acquired by U.K.-based WPP PLC, and Montreal-based Bos sold to Tokyo-based Dentsu Inc. At the time, leaders of both agencies cited the need for global reach among their reasons for selling. In particular, they pointed to the inability to serve clients in China on their own.
Since the acquisition, DentsuBos has teamed up with Dentsu Japan to pitch for the global Hitachi business. The network won, and a global campaign for Hitachi running in 22 countries, and in 14 languages, was produced in Canada.
"Without the network, forget it. Bos on its own would never have had a call from Hitachi," said Claude Carrier, DentsuBos president and chief executive officer.
Sid Lee currently has offices in Montreal, Toronto, New York, Los Angeles, Paris and Amsterdam. The goal is to open four or five more within the next few years, Mr. Cesvet said, including offices in Asia. Mr. Cesvet believes it could help the agency to expand its relationship with existing clients.
"For Absolut, the biggest market for them is the U.S. but … the fastest growing is China. For these guys, it's going to be important to be there," he said. "We work a lot with Intel in New York. For them, the Asian market is hugely important. We work with BNP Paribas in France. They are really interested in growing in Asia. So it's going to be really interesting."
Sid Lee will operate under the auspices of a new Hakuhodo subsidiary based in New York, called kyu. The agency will continue to have its headquarters in Montreal, and the current management team has signed incentive deals to stay on for four and a half years. The agency's board will comprise two representatives from Hakuhodo and three from Sid Lee.
Kyu, which was founded last year, includes other agencies, such as small digital-focused shop Digital Kitchen and branding consultancy Red Peak Group. It is led by former Omnicom Group vice chairman Michael Birkin.
"Some clients are looking for global partners. Some remain quite happy to choose selected partners in different parts of the world," kyu CEO Mr. Birkin said in an interview from Montreal Monday. "The approach we take will be client-driven."
Cirque du Soleil, which is currently undergoing its own ownership change, will continue to hold a minority stake in the agency, as it has done since 2012. Sid Lee and Cirque have partnered on a division called Sid Lee Entertainment, which puts on live events for clients such as as Absolut, Lolë and Bombardier. Sid Lee also acts as Cirque's advertising agency.
"We're looking to build brands in the fullest sense, not simply from a communications perspective but from a design and experiential perspective," Mr. Birkin said.
Hakuhodo employs roughly 13,000 people in 18 countries.
"I don't think there's ever been a marketing and communication brand in Canada that's become truly global. For us, this is the opportunity," Mr. Cesvet said.
The agency was founded in Montreal in 1993 by two students, Jean-François Bouchard and Philippe Meunier. Mr. Cesvet joined the company three years later. It was first called Diesel, and then changed its name to Sid Lee – an anagram of the original moniker – in 2006, to avoid confusion with the famous brand of jeans.
The management team at Sid Lee began travelling to Asia more often in the past two years or so, attempting to build potential client relationships, Mr. Cesvet said. Discussions with Hakuhodo began when kyu leadership approached the agency late last year.
"It's a big thumbs up for the Canadian industry, and the talent pool we have in this country," Mr. Cesvet said.