Merkle staff and shareholders receive $100m windfall as Dentsu takes control

Dentsu has taken full control of Merkle earlier than planned, paying about $108m (£86.4m) to buy shares from the agency’s staff and shareholders.

It is thought that dozens of Merkle employees will benefit from what Dentsu called the "accelerated" buyout.

They will receive their shares in the third quarter of 2021, even though the deal was agreed in April 2020.

Dentsu has also sought to tie in 25 of Merkle’s top managers, including David Williams, the founder, chairman and chief executive, by granting them shares worth about $60m in a long-term retention scheme.

The managers will be able collect those shares, subject to conditions, in 2023.

Dentsu disclosed the issue of 7.3 million shares, at a value of ¥2,467 (or about $23) each, in an investor filing at the end of March.

The buyout of Merkle’s staff and shareholders required 4.7 million shares (worth about $108m at the current price) and the planned share grant for the 25 managers involved another 2.6 million shares (valued at about $60m).

Dentsu Aegis Network, the international operation of Japan-based Dentsu, bought a 66% stake in CRM network Merkle in 2016 for an estimated $1.5bn.

Merkle is said to have risen considerably in value since then, with one source estimating that it could be worth more than $2bn.

The US-led network employs 9,000 people in 56 markets. Clients include Dell, Kimberly-Clark, Samsung and Sanofi.

It is not clear how any increase in the company’s value might have affected the share awards, which were calculated on the basis of Merkle’s performance up to December 2019.

Dentsu Aegis said: "The decision to bring the full purchase forward brings Dentsu Group Inc a number of advantages: it secures the expertise and knowledge of Merkle’s senior management team, strengthens DAN’s CRM line of business and the group’s ability to offer clients world-class integrated solutions across creative, CRM and media; and allows the deployment of key Merkle talent to global roles across Dentsu Aegis Network." 

Williams, who is also chairman of Dentsu Aegis in the Americas, said: "Today’s announcement is a positive step in our full integration, solidifying the future of the team as central to Dentsu Aegis Network’s strategic ambitions. 

"It provides us all with materially more flexibility to deliver integrated solutions for our clients, working alongside our talented colleagues across DAN’s media and creative offerings. 

"In addition, the economics of Merkle are now fully linked to Dentsu’s, thus empowering us as ‘One Dentsu’ to move with agility as we emerge from the challenges of coronavirus – together."

Dentsu has said it wants to bring its Japanese and international operations closer together.

The "acceleration" of the option to buy out Merkle, which had been due to complete in 2021, gives Dentsu "a strong competitive advantage vs our peers" as it seeks "to further integrate our services into one consistent global offering", according to its investor filing.

Toshi Yamamoto, president and chief executive of Dentsu Group Inc, and acting executive chairman and chief executive of Dentsu Aegis Network, said: "Today’s announcement is significant on many levels as we fully integrate Merkle into Dentsu Aegis Network.

"At a time of considerable uncertainty, this agreement provides clarity to our employees, clients and stakeholders. Merkle are the market leaders in data, analytics and CRM, and this accelerated integration will help to further future-proof the business, enabling revenue growth and improving operating margins globally.

"Merkle represents the highest growth area of the overall business. For our clients, the acquisition has already been transformative, positioning us as world leaders in delivering fully integrated services and solutions across the marketing mix, alongside our media and creative offerings, helping our clients to win, keep and grow their best customers."

Merkle began as a data processing company in 1971, before Williams bought it in 1988 at the age of 25 and he expanded in digital marketing and CRM.