In an increasingly borderless world, Hakuhodo is strengthening its overseas operations and enhancing its ability to respond to clients around the globe. Currently Hakuhodo has more than 105 overseas offices in 19 countries and regions. In this interview series, leaders from various domains share their insights on how Hakuhodo is rising to meet new challenges. For our fourth installment we hear from Yasutoshi Hiratsuka, General Manager of the International Business Strategy Division about Hakuhodo’s blueprint for building a global agency network through M&A.
The past few years have seen Hakuhodo steadily acquiring a number of overseas agencies, including Thailand’s Winter Egency, India’s AdGlobal360 and Taiwan’s Growww Media (the Growww Group). Yasutoshi Hiratsuka, the General Manager of the International Business Strategy Division for Hakuhodo, is responsible for leading these initiatives.
“As well as promoting collaboration with account service teams—supporting international businesses and specializing in international media businesses— Hakuhodo’s International Business Strategy Division is responsible for overseas investment practices,” says Hiratsuka.
As part of its medium-term business plan, Hakuhodo DY Holdings, the parent company of Hakuhodo, has committed to strengthening overseas operations to better respond to globalization trends. In line with this, Hakuhodo is actively bringing on board overseas agencies that which support its philosophy and management approach.
Hakuhodo’s M&A espouses its corporate philosophy of Sei-katsu-sha Insight, which recognizes that sei-katsu-sha (living people) are individuals with distinct lifestyles. “Of course, the purpose of entering overseas markets is to expand revenue opportunities outside of Japan, but ultimately it’s to realize our corporate philosophy of always staying close to sei-katsu-sha in each country, and pleasing as many of them as possible,” he explains.
With Sei-katsu-sha Insight as the starting point, Hakuhodo is committed to the growth of local companies and to winning the hearts of sei-katsu-sha. Hakuhodo is reaching out to identify and join with other agencies who share this vision through its M&A activities.
In 1981 Hakuhodo established the Hakuhodo Institute of Life and Living (HILL), a think tank dedicated to the sei-katsu-sha concept, followed by HILL Shanghai in 2012 and HILL ASEAN in 2014. “What makes HILL unique is its ability to conduct research on sei-katsu-sha from multiple and unique perspectives, including surveys to track changes on their values and on-site visits,” Hiratsuka points out.
To better serve sei-katsu-sha, it is important to know what makes them tick. “We have these institutes working to gain an in-depth understanding of the sei-katsu-sha in each country and giving back to society by releasing the data free-of-charge . This dedication is one of the first things that people look for in an M&A transaction, and it’s what differentiates us from our competitors,” he says.
Identifying potential partners takes time and patience. While criteria such as business size, past achievements and market reputation are important, Hiratsuka notes that Hakuhodo’s style is to carefully work through the process of mutual understanding. “I often use the analogy that, just like in a relationship, you need a ‘dating period’!” he says with a laugh. “During this time we should communicate our feelings about each other’s management philosophy, way of thinking and attitude towards action.”
He points out that Hakuhodo’s business is based on responding to the needs of clients in each country, and that these needs vary greatly between countries due to differences in culture and values, and changes in technology and communication. “We need to build strategies based on a deep understanding of each customer’s journey. As a result, the areas in which we should provide solutions also change, so it’s not just a case of ‘this industry or area comes first’,” he explains. “The Covid-19 pandemic has triggered major changes, and so we must respond to the world’s diverse new needs.”
Hiratsuka says it’s clear that Hakuhodo should focus on expanding its global network in the digital domain. “With people staying home due to Covid-19, there have been major changes in sei-katsu-sha behavior, such as the rapid expansion of e-commerce usage, the huge increase in the number of those watching video streaming videos on their smartphones, and the strengthening of connections between people through social media.”
Against this background, the issue is how to create communications that will attract interest in Hakuhodo’s clients’ products and services, and lead to sales. In a world where digital has become the norm, Hiratsuka believes that companies showing strengths in the design and structuring of communication can become important potential partners.
He cites India’s AdGlobal360 as one example. “When it comes to building CRM systems from scratch to meet clients’ digital transformation needs, they know exactly what technology to use. They understand what is required, and are very good at being agile, building prototypes, implementing them, and fixing them if there are any problems,” he says. “Similarly, Winter Egency in Thailand and Growww Group’s Medialand in Taiwan are also top-notch digital agencies, well-versed in the local digital landscape and winners of many awards.”
Activation is another key focus for Hakuhodo’s global business. Amid the spread of digitization and virtual communication, Hiratsuka sees a rising importance for people to be able to experience things directly. Advertising and marketing methods to facilitate this, such as events and pop-up stores—activation—are in demand. “Of course, Covid-19 requires us to seek ‘non-contact’ activation measures, but the fundamental human desire for ‘real experiences’ will not disappear,” he says.
“The HICG Group (headquartered in Singapore), which joined the Hakuhodo family in 2017, is promoting efficient operations by shifting all exhibitions and B2B events held in Asian countries online. Square Communications Group in Vietnam, which joined us in 2018, also provides digital solutions that maximize the appeal of products and brands, as clients require virtual support for events and in-store promotions. KY-Post and Interplan of Taiwan’s Growww Group, which joined last year, are activation agencies that are particularly strong in planning and implementing solutions for trade shows, and are accelerating the hybridization of online and offline events in Taiwan, where the impact of Covid-19 is limited,” Hiratsuka says.
In terms of searching out potential firms, the process is fairly orthodox according to Hiratsuka. “We search on our own by gathering information from our local contacts and offices, and by carefully checking awards and rankings. We also receive information from specialist brokerage firms,” he says.
However, when it comes to post-merger integration (PMI), Hakuhodo takes a unique approach. “I’ve heard that at many other companies, specialized M&A teams take charge of acquisition negotiations, and then hand over PMI to another team,” says Hiratsuka. “While this may be efficient, it’s not in line with Hakuhodo’s policy. We value our relationships with our counterparts and continue to maintain them after the acquisition, with help from those who handled the negotiations and from our local offices.” He adds that this style of business fosters a sense of trust and security for all involved.
Hakuhodo draws on another corporate philosophy for guiding the post-merger relationship: The concept of Partnership, or being a responsible partner. Calling M&A a “fusion of different cultures,” Hiratsuka believes that Hakuhodo has been able to utilize its communication and problem-solving strengths to cultivate sound relationships.
“Unlike other companies, where finance, accounting and other specialists are mainly in charge of acquisition negotiations, at Hakuhodo the majority of our team members have experience in the advertising field or in management. Because of the underlying communication skills being nurtured at Hakuhodo, we are able to avoid various conflicts, build developmental solutions, and make full use of our extensive know-how to integrate management policies and increase employee motivation,” he says.
He adds that anyone involved in this line of work must be a communications professional, as well as possess knowledge and understanding of other cultures, whether it comes through having worked at another company or from having spent time abroad. “These are indispensable strengths for understanding and empathizing with overseas counterparts through M&A,” he says.
Drawing on the aforementioned dating analogy, Hiratsuka likens M&A to two individuals from different backgrounds coming together in marriage. “Without respect and empathy for each other, it won’t work out,” he says.
Taking advantage of the fact that online communication has become the norm in the Covid-19 era, Hiratsuka and his team have been getting to know the many talented people who have joined the Hakuhodo family as a result of M&A. The online “Monthly Summit” is an opportunity to share solutions and case studies, and to create regional synergy in the areas of digital, PR and activation. “We have already come up with concrete ideas for EC solutions that integrate the strengths of each company, creating good synergy,” he says.
According to Hiratsuka, these activities are a natural extension of a shared culture based on Hakuhodo’s philosophy of Sei-katsu-sha Insight. “It is because of this underlying idea that we are willing to generously share our strengths and co-create new value. I am sure this will be a major advantage for Hakuhodo’s global business.”