M&C Saatchi sells stakes in loss-making units in Hong Kong and Sweden back to local owners

M&C Saatchi, the London-based advertising company, is divesting its interest in struggling subsidiaries in Hong Kong and Sweden to their local founders as part of its ongoing restructuring efforts. This development comes amid a series of significant changes within the agency, including the departure of Asia CEO Richard Morewood and the consolidation of its Singapore and Malaysia offices. It follows the agency’s sharp drop in profits in 2023 due to the impact of the pandemic and a weak technology sector.

The agency, which counts Amazon, Grab and TikTok among its key clients, said it sold its 100% stake in M&C Saatchi Spencer Hong Kong Ltd to local ownership. The deal will see veteran creative leader Spencer Wong who launched the Hong Kong office in 2018, take full ownership of the business. 

At the same time, the agency significantly reduced its stake in M&C Saatchi AB in Sweden from 70% to 30%, with the Swedish management team, including directors Max Bon de Veire, Linda Elers and Daniel Sundin acquiring the divested stake from the company. The stakes were said to be sold for nominal amounts as they were deemed non-core assets. 

The Swedish subsidiary, which opened in 2012 as a gateway to the Nordic market, suffered a £360,000 loss in 2022 and is expecting more losses in 2023. M&C Saatchi Spencer, launched in 2018 in Hong Kong, is also expected to lose money in 2023, the company disclosed. 

Wong issued a statement to Campaign, saying: "We will keep the operation under the name M&C Saatchi Spencer, aiming to focus on the branding and marketing services in Hong Kong and Greater Bay Area."

He added that the agency has a new and exciting business model and strategic development in the pipeline that will be announced soon. Wong's last project was a 10 meters tall and 36 meters wide waterproof robotic arm UA Finance’s 30th anniversary. The colossal activation brought to life with media partner GroupM was on display at the Hong Kong harbour. 

Previously, Wong led McCann Worldgroup as CEO and chief creative officer for 12 years. He earned the rare honour of having an ad agency named after him, when McCann rebranded its Hong Kong branch as McCann & Spencer in 2015. This was the first and only time a creative in Hong Kong received such recognition.

Spencer Wong with then Asia CEO Richard Morewood and key agency members at the 2018 opening of M&C Saatchi Spencer in Hong Kong

M&C Saatchi aims to streamline its operations and focus on key markets to enhance efficiency and competitiveness in the rapidly evolving advertising landscape.

The agency has been undergoing a major overhaul since 2019, when it uncovered accounting irregularities that led to a series of profit warnings and board resignations. It has since closed or sold several offices, cut costs and raised capital to strengthen its balance sheet.

Globally, the agency is not in the best shape, reporting a 7% decline in global revenue and a $10.23 million drop in operating profit in the first half of 2023. 

M&C Saatchi finished 10th on the May-June 2023 creative table, down from the third spot at the start of the year, in Campaign’s Advertising Intelligence tool’s ranking that tracks new business on a global level.

Regionally, estimated year-to-date net billings remained at $127.3 million with 36 new client wins. Top among those for the agency: Resort World Sentosa, a finance and insurance client, and Australian Retirement Trust.

Economic challenges that plague the wider market are posing troubling conditions for the shop that has previously been hit by accounting scandals in 2019, followed by the pandemic in 2020 and hostile takeover bids throughout 2022.

In a November 2023 conversation with Campaign, Justin Graham, the new Asia chief executive, assured that the region is still very much a priority for the agency. “Asia is an important region for growth and innovation. The goal is to work towards centralised collaboration, stabalise and grow the company to make it future-fit.”

The impact of these changes on M&C Saatchi's standing in Asia are yet to be seen. Stakeholders will be eager to see how the agency will leverage its restructured operations to capitalise on emerging opportunities in the dynamic Asian market. H2 results are yet to be announced, but the agency says it expects a “small single digit” percentage decline in net revenue in the second half of 2023.