M&C Saatchi invests in local independent to revive flagging China presence

The new agency, to be called M&C Saatchi aeiou, will be managed by aeiou founders Tony Liu and Michael Liu, reporting to Asia CEO Chris Jaques. They take over from Angela Hsu who has departed her position as CEO of M&C Saatchi China due to a lack of a good fit for her in the new agency structure.

The dual-partners of aeiou will initially have a majority stake in the joint venture, with an agreement for M&C Saatchi to increase its shareholding over an undisclosed timescale.

Michael Liu is managing director of M&C Saatchi aeiou in Shanghai and managing partner of Greater China. Tony Liu will be executive creative director in the same leadership capacities. Notably, Jaques was his boss during 1998 and 1999 when Liu was ECD of BBDO Greater China.

Joining forces with an independent, as opposed to an outright acquisition, is a rare step for a 4A ad agency. Jaques emphatically prefers to call the move "an addition into a federation of entrepreneurs".

"We don't really acquire companies," he told Campaign Asia-Pacific. "It is not what we do normally. Every single M&S Saatchi office around the world was a startup, except for Spain".

Michael Liu added that five companies, including famous global creative hotshops and international networks, have approached aeiou in recent years, but few of them truly shared the same values. "We're both entrepreneurial organisations," he said, referring to M&C Saatchi.

"Also for the global hotshops, they are famous elsewhere but not in China, and we will be building their names instead of our own," commented Tony Liu, who added he would not be happy dealing with the corporate culture prevalent at 4A agencies if aeiou were to be bought outright.

"You spend all morning answering emails which you are CCed and BCCed on, and handling 'firefighting' tasks instead of creative work," he said.

Jaques has spent the last two years trying to find the perfect partner to improve the agency's quality and momentum in the critical market that is China, meeting with more than 70 independent shops which did not pass the tests for chemistry or financial due dilligence.

Following a strategic review and an elongated process of talks, discussions and negotiations, Jaques decided to leverage the success of the aeiou to "create an exciting new creative agency...competing with the biggest and best in the China market".

M&C Saatchi has not been known for the strength of its China presence. In the case of the mainland, there are some issues that made it harder than other markets. "There is no such thing as a niche agency brand; you gotta be a big name or have a massive client," he explained.

In his five-year tenure as Asia CEO, Jaques candidly said M&C Saatchi's China operations have not merely failed to make progress—they have gone backward. Half of its clients have been project-based and half on a retainer basis, but even those change agencies every year, he said.

M&C Saatchi China won the Lenovo contract in June 2011, but lost it after a year. A similar situation occurred with Volkswagen. "It's a vicious cycle," Jaques said. "If you don't have substantial ongoing clients, you don't get committed management, you don't get depth of resources, you don't get scale and respect in the market."

Past mistakes aside, with immediate effect the new company will be headquartered at aeiou's offices in the French Concession in Shanghai, and will become the hub of M&C Saatchi's operations across Greater China.

Launched in 2003, aeiou today has more than 60 staff working on a client list that includes La Mer, Montblanc, Shiseido Tsubaki, Cle de Peau Beaute, Heinz Long Fong, Sun Hung Kai and Shui On, as well as local brands like K-Boxing, Hui Shang Bank, Tenwoo and Tianyou Dairy.

As for M&C Saatchi China, it currently has 50 employees in Shanghai and Beijing offices, servicing VW, Audi, UniPresident, Mengniu and Gold Coast Tourism.

Shanghai-based staff will be moving in with aeiou premises to merge into "one unified entity offering a clear positioning in the competitive Chinese advertising market", according to Jaques, who nonetheless admits that fierce competition will force his hand in laying off some redundant positions.