Lifting the veil on Accenture's acquisition of Entropia

Accenture Interactive has acquired Malaysian full-service agency Entropia for an undisclosed sum as it seeks to become "the top experience agency in the region", according to Azwan Baharuddin, the country managing director of Accenture Malaysia.

Five-year-old Entropia, which has rejected several takeover offers in recent years, believes it has found a partner that will enable it go "much deeper, much wider, and up the value chain", according to founder and senior partner Prashant Kumar.

In an exclusive interview with Campaign Asia-Pacific, Baharuddin and Kumar divulge what attracted them to one another, their future growth plans as combined entity, and how the integration will be managed.

Why Accenture bought Entropia

Entropia brings capabilities across data, customer experience, commerce and emerging technology, that, when plugged into Accenture's digital transformation prowess, will deliver "a more holistic business approach" for clients, Baharuddin says.

A new approach to customer experience is required since the Covid-19 pandemic shifted behaviours in how people shop, work and interact, he explains.

"Gone are the days when customers are going to compare between two brands in the same space. Now you have the convergence of industries, the confluence of technologies, so customers now compare their experience across multiple brands, across different parts of their lives," Baharuddin says.

The rise of 'super-app' offerings points to a broader trend of "everyone wanting to be everything to the customer", Baharuddin says, giving rise to an "experience renaissance".

"Companies are beginning to push that conventional CX philosophy and focus on a much more holistic customer-centric strategy that really responds to the customer's frequently changing needs," he says. Accenture calls this philosophy 'business of experience', or BX.

While Accenture has been growing its business experience team, most of its work with clients is in strategy and consulting, technology implementations, and operations.

"So when you suddenly can add 220 people with the talent like Prashant and his leadership team...it became clear that that was not an option, it is something that we really had to do," Baharuddin says.

"These guys have all the skill sets that we actually need and getting top talent in the country is always very difficult...We realised this was a real gem of a company that is able to truly supercharge our own."

Baharuddin is particularly proud that a homegrown Malaysian agency is the first acquisition for Accenture in Southeast Asia. "It opens up the eyes of leadership in the region that there are actually companies sitting in Malaysia that just don’t have the exposure or reputation [yet]," he says.

Why Entropia sold

Entropia's Kumar has spoken in the past about the virtue of independence, especially with regards to agility and establishing differentiation. He's attributed Entropia's rapid growth over the past five years in part to its ability to poach clients from big networks such as GroupM or Carat, by offering a new approach to their business needs. So why did he decide to trade independence to become part of a US$10.6 billion marketing empire (according to Accenture's 2020 financials)?

Kumar continues to see the advantage in being independent "when you are trying out a new model". In this scenario, you need "all the degrees of freedom that you can get so that you can experiment just as you like".

"Decision times can be very fast, you can move at speed, you can be supremely agile, whereas with scale, it will be less likely. That is why startups are so much more successful in disrupting than, say, large established corporations," Kumar explains.

But Entropia's model is now well-established, and with 220 staff it claims to be one of the largest agencies in Malaysia with a broad, full-service offering.

"Now we find ourselves at a certain inflection point in our evolution, where we realise that the next level of growth, to realise the vision of a true consultancy, we need really a solid, large organisation to give us the diversity and depth of skills required," Kumar says. "We are looking at a future where we can offer a complete end-to-end experience for clients, including value-chain recreation, demand transformation, business model reinvention, and reimagining the customer experience."

"It's a natural inflection point in our life cycle, and at this stage, we couldn't have done it alone," Kumar adds.

Accenture is not the first company to show an interest in Entropia—Kumar reveals that he has had several acquisition offers from both consultancies and advertising holding companies in recent years. He says the leadership team only began to consider selling towards the end of 2020, as the agency approached the end of its five-year growth plan. "We were very careful that a premature acquisition may mean that our model was not yet validated," he says.

Kumar believes the deal is a blueprint for the marketing business of the future, which he refers to as a 'consulgency'.

"Consultancies realise that technology alone is not enough. Agencies realise that creativity alone is not enough. So technology and creativity must come together for us to be able to engineer empathy across the total business experience," Kumar says.

"We can finally see with Accenture and Entropia coming together, for us to be able to live that expression in all its depth and breadth. We believe that the significance of this event will only be realised 10 years later, when you will see a very different consultancy industry and a very different ad industry coming out of this blending. We are just the opening gambit."

Baharuddin calls the deal as "a match made in the future".

Scaling the partnership

Accenture lured Entropia with the offer of regional and global scale.

"The team [at Entropia] has this ambition to be more successful but they are limited by reach. Accenture's the highway to other markets, because we've got presence in virtually every country in the world," explains Baharuddin.

The majority of Entropia's business in the last five years has been won in Malaysia, with some clients in Singapore and the Philippines. While Kumar is looking forward to scaling out to other markets, his mantra for Entropia has always been to "go deep before going wide", something he intends to maintain for the next six months.

"We will use this year to integrate closely, to define the frameworks of how we work together, to firm up the model. Then we scale it out to other places," he says.

Entropia has an existing partnership with Havas Group through which Entropia provides its expertise to Havas Immerse's media briefs in Malaysia, and Havas helps to service Entropia's clients in markets in which it does not have a presence. Kumar does not see the partnership as in conflict with its new ownership structure, and intends to maintain it. Accenture did not comment.

For Accenture, Baharuddin sees "tremendous opportunity" to build a new experience model in Malaysia and then export the capabilities to other markets.

More acquisitions in Malaysia to complement Entropia could be on the horizon.

"I don't think we'll stop at Entropia," Baharuddin poses. "The ambition is to capture as many great talent out there as possible, fantastic creative companies that will help our country grow."

Integration

Accenture would not share terms of the deal or specifics on how the integration will be managed, but Entropia's Kumar tells Campaign that the Entropia brand will remain "for the foreseeable future" and that he will remain with the brand "for at least three years", suggesting a three-year earnout period for the agency's leadership.

"I hope to stay in the long-term," he adds.

The acquisition is not expected to result in any job losses for Entropia's 220-staff. "If there is one thing that Accenture has always been very clear about, it is that they wanted to put people at the centre of this team. The quality of the people is the stuff that attracted them the most," Kumar says.

As proof of Accenture's commitment to its people, he says the deal was structured in a way that that benefits not just Entropia's 19 shareholders (13 of which are employees), but also its employees. "It has some very progressive elements that will be wonderful for everyone," he says.

Equally, he's hopeful that he can protect the agile, playful culture that has been central to Entropia's success. "I would like to believe that, even though with Accenture suddenly the scale that we have is a whole different behemoth, that we can create the best of both worlds: a leader’s scale, but a challenger’s attitude."

Baharuddin is aligned: "The only way to be successful is to infuse the culture that we want to create—this fun, creative, forward-looking mission-building entity."

Accenture Malaysia has 11 offices across Kuala Lumpur with 7,000 staff (up from 2,000 four years ago). Baharuddin said the business is working out a way to rotate Entropia staff across the offices and remotely via Microsoft Teams.