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STW on Asia acquisitions: we don’t buy digital agencies to salvage traditional players

STW Group COO Chris Savage

STW Group COO Chris Savage

The COO of Australia’s largest agency group has said that it will not use the digital companies it is looking to buy in Asia to salvage the fortunes of traditional agencies, as in his view rivals have been doing.

STW Group chief operating officer Chris Savage told Mumbrella: “We will back their dreams. We will support their growth ambitions. We won’t use them to salvage or save or keep traditional agencies relevant.”

STW has been in acquisition talks with 150 companies in Southeast Asia, and entered “serious discussions” with 20 in the 18 months since it has made serious moves in the region – and says it is close to completing deals with three companies.

STW is hoping that its Singapore-based Southeast Asia operation will contribute 10 per cent of total revenues and profits by 2016, as stated in its annual report to the Australian stock exchange in February.

The company is building a business “with digital at its core, unburdened by legacy businesses,” Savage said. “Our goals are modest. By 2016, we want to be generating around $65m in revenue in Asia.”

STW Group’s Asia operation now has 600 staff with 70 per cent of revenue coming through digital sources.

Acquisitions in the last 18 months include Edge Marketing in Vietnam and Thailand, which has since launched in Singapore, Indonesia and Malaysia, Alpha Salmon in Indonesia, which has since opened a Singapore office, Aleph Labs in Singapore and Bullseye in Indonesia. It also opened New Zealand-based Design Works in Singapore, and launched Buchanan Group in Singapore and Malaysia.

Savage said that STW’s approach has been welcomed in Southeast Asia, which is a “more comfortable, natural fit for stage one of our expansion.”

“The people we’ve been talking to like our story, because we’re local. They see us as part of the region,” he said.

“They see us as user friendly. Our deal discussions are driven by me, the COO, or the CEO [Michael Connaghan]. The holding companies do not use their top people for negotiations, leaving people wondering what the company culture of the acquisitor will really be like,” said Savage.

“The most powerful thing is our model. The companies we’re looking at understand that they’ll be the jewels in the crown – not bolted on to the back end of a traditional player,” he said.

“We don’t have a massive, well-establised client base in Southeast Asia. But the people we’re taking to don’t want leverage through our clients. They’re confident in their own. They want a partner with grunt that’s backing their dream. They don’t want to be tampered with or beaten about.”

Earlier this year, STW was drawn into what an Australian trade journalist described as a “cold war” with WPP – its major equity partner in Australia – over comments made by WPP boss Martin Sorrell that STW should focus on Australia and stay out of Asia.

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