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OPINION28 July 2011

Not such a big deal, but a good fit in Asia

Opinion

Bulking up in Asia is a key aim for Ipsos in its takeover of Synovate. After crunching some numbers, John Wigglesworth reckons the two companies are a good fit and that a well-handled integration should be a great opportunity for the agencies’ Asia Pacific staff.

But from an Asia perspective, it seems the two companies will complement each other relatively well – over time, clients may find they actually benefit from deeper expertise and operational efficiencies. For employees, the integration may be a lot less painful than they think. Here’s why.

Same size, different footprint
Overall, the two companies are of a similar size in Asia. Ipsos’s 2010 annual report shows APAC (external) revenue of around USD $180m. There is no directly comparable figure from Synovate as the company uses two mechanisms for reporting revenue – total revenue (which was $260m for APAC last year) and net revenue (with a corresponding figure of $160m). This latter number removes direct costs – which, presumably, will include a substantial amount of business between the different offices of Synovate. At a guess, assuming two-thirds of direct costs are attributable to intra-company sales, the comparable APAC figure may be in the region of $200m.

However, these aggregate numbers mask quite pronounced differences by country. We estimate Synovate’s southeast Asia businesses probably top $50m in combined external revenue, compared with Ipsos’s at about $27.5m. So in this part of the region, it is Synovate that is the much bigger fish, with perhaps nearly double Ipsos’ revenue. This is not surprising, considering their AMI heritage.

Indeed in several countries, there is very little overlap (if any). Ipsos doesn’t have a presence in Vietnam, whereas Synovate launched there last year. In Malaysia, Synovate has an established business; Ipsos entered the market only last year. And Ipsos’s Hong Kong operation is relatively small (revenues of around $3.5m), whereas Synovate is a very big player this market.

Complementary specialisms
Moreover, even in countries where both companies are well-established, there is generally less overlap than one might expect. In many areas, there is virtually none – examples from the Synovate side include a large healthcare practice, business consulting and Censydiam. For Ipsos, there is their advertising specialism, social research and several other areas that reflect their unique matrix structure.

Even when one considers less specialised research, the two companies are quite complementary in many areas. Synovate’s qualitative side of the business is rather more developed and, in any case, Asia is a tight labour market for qualitative researchers (largely because of the growth in freelancing). For quantitative FMCG research, which accounts for a very large proportion of research spend in Asia, Synovate have key contracts in place with Unilever, whereas Ipsos have P&G. In a combined organisation, the need for Chinese Walls means teams would need to remain distinct. Ipsos is also relatively weak in the financial services sector, a real area of strength for Synovate. The list goes on.

Not such a bad fit
Overall, the two businesses will complement each other relatively well. That’s good news for researchers on both sides of the business. The combined organisation would dominate custom research in the fast-growing China market, and enjoy strong economies of scale there. The overall footprint in Asia will be stronger, facilitating better (and more cost-effective) delivery of pan-regional research, and thus a higher probability of winning major multi-country pitches. Ipsos would inherit Synovate’s strong operational infrastructure. And there will be ample opportunity for cross-selling of proprietary products from both sides of the business to an enlarged client base. All of this would potentially accelerate growth, which is already healthy for both businesses in Asia. Assuming the integration is handled well, we believe employees from both Ipsos and Synovate should see this as a great opportunity and not a threat.

John Wigglesworth is a former GfK director, now running Asia Research Recruitment in Singapore

11 Comments

8 years ago

I cant disagree more: 1. Synovate has a strong 'we are the best culture" (I said culture...) which wont fit the humble approach of Ipsos. 2. Many Synovate key staff have moved to Ipsos for the past 3 years at key role. They were smart. Take the example of Malaysia... It is a integration nightmare, for those who are on the ground know well the inner politics of the Synovate Malaysia office. 4. Synovate opened Vietnam with 2-3 staff, it has no field work capacity and outsources the work to local outfits. This offers little or no value to Ipsos. 5.Synovate Business Consulting has been a dead beat market intelligence outfit with no growth and no future. Internally, there is a lot of doubt about this business unit's future. I suspect Ipsos will 'streamine' Synovate Business Consulting operation. 6.Synovate has some brand equity in Asia. Ipsos, has none. Synovate was a kind of new breed market research agency, Ipsos is old fashion qual house. Bottom line. Jobs will be lost. Internal politics will be strong. Brand equity will be destroyed. Some business units will be slowly culled. Synovate staff (very "Anglo Saxon with heavy beer drinking culture) will walk away and set up more spin offs. They just dont fit the wine drinking culture of Ipsos. The are great opportunities in every threat. For me it is a headhunter opportunity ! Lots of Synovate staff will want out or will be forced out. It is true in all acquisitions.

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8 years ago

What is your take on the Business Consulting Unit of Synovate which is present in about 16 countries, how does this fit in with the intergration? Considering IPSOS does not have a consulting unit or a history in consulting

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8 years ago

(Editor: Anglo-saxon heavy beer drinking culture??? how did that judgemental cultural stereotyped comment pass????) My only concern right now as a client is that precious talents would be lost due to the merger irrespective of how Ipsos tries to retain them. During the TNS RI combination a lot of staff had left even before the final lead managers/ offices had been announced. Both John and Chee would be equally right as Ipsos is patchy and has displayed varying standards globally. In Asia too its mainly a mix of ex-RI, smaller agencies and ex-synovate staff - some of them happily torpedoed by their ex-agencies. Not sure if Synovate had arrogance, but some of their staff well-deserved their 'we're the best (Asian qual in particular). I am only hoping Ipsos does a good round of deliberations offering everyone an opportunity before deciding the lead teams for the combined merger - otherwise they stand to not only lose good teams but clients as well

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8 years ago

Humble culture of Ipsos?????? Presume you are talking about Asia - cant disagree more. In some parts of Asia, the growth-driven Ipsos has been threaded together by promoting talents who really wouldnt have broken the achievement-ceiling to move up. Some of these folks have been provided senior designations which their ex-agencies didnt have (nor does synovate). For e.g. how many "Executive directors" can a company have - and do they outnumber your "managers" in the country? Synovate has been relatively more consistent in its research standards and HR policies (across Asia). Sadly the price for such bad and desperate HR policies by IPSOS is to be paid by a) Synovate and b) the clients who have to put in the additional legwork and value-addition that few of the senior managers would be able to conbtribute fully.

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8 years ago

I think market research taking over market research . Definitely there will be jobs lost by many of Synovate employees... For smaller businesses within synovate, its now the decision of Ipsos and their internal consulting team to decide who they want ot retain or spin off Till then Synovater's are actually in mess and all sorts of confsion. Uncertainiity looms mostly where ever Synovate team is very small

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8 years ago

Q = What is your take on the Business Consulting Unit of Synovate which is present in about 16 countries, how does this fit in with the intergration? Considering IPSOS does not have a consulting unit or a history in consulting A = Limited interest within Ipsos for Synovate Business Consulting, an ailing business unit unable to growth for the past ten years. Synovate's Business Consulting unit is small and its presence in 16 countries (actually only 10...) is made of small offices (staffed by 5-6 consultants) Ipsos can surely live without. Too many internal headaches, too little returns. Expect some culling. It happens with all acquisitions. In any case, CVs have been flying out fast already. I suspect the Synovate Business Consulting staff can hear the fat lady singing.

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8 years ago

In terms of the Business Consulting question, my view is that it (of course) outside mainstream market research, and so will never command substantial revenues vis-a-vis (say) branding or NPD work. Hence there are not huge teams in place in each market. I don't think that matters. It is more about growth and potential. And in Asia, there is a lot of potential for the division due to a combination (a) the type of work they do (b) the sheer size of some of the markets in terms of number of consumers and (c) economic growth in the region. Much of BC's work centres around providing guidance and consultancy on new market entry (or expansion) strategy. Asia continues to enjoy strong macroeconomic growth and is home to large proportion of the world's consumers - and that means a lot of Western (and other non-local) companies are interested in evaluating and assessing if/how/where/when to enter certain markets. That presents a big opportunity both now and in the future for BC. And ailing? Certainly not in China, from what I hear - they have enjoyed very good growth. So in my view there is not a strong rationale for 'some culling' in BC if they can deliver good growth moving forward. True, Ipsos have set a high bar in Asia - their APAC organic growth 2009 vs. 2010 (readily available in their annual report) is pretty stellar by anyone's standards. Of course any business unit that underperforms (and thus drags down overall growth) will doubtless get reviewed, but I'd be surprised if Ipsos make any dramatic moves (such as dissolving business units) in the 12 months following the integration. I rather think they will wait to see how the financial performance evolves, post-acquisition, and then make a decision. I actually think Alvin's 'fat lady' is some way from even leaving her dressing room, let alone singing.

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8 years ago

Synovate Business Consulting has NOT grown for the past ten years. Its only track record is to have a succession of key departures, closures, re-opening, etc. It has not achieved anything at all. if growth there indeed was, this division would be a key player on the market. It is not. Till now this division has not found its groove within Market Research. It never will, and certainly not under Ipsos, which is even more hardcore consumer research Qual - Quant than Synovate. So it is not about growth potential it is about having a growth track record and the right allocation of resources (cash...) for management. When you represent 0.01% of company revenue, your survival chances are very humble regardless of your 'potential growth'. It is basic economics. Their China operation is staffed by 20 years old interns and has a poor name in Shanghai. Nothing to rave about. The fact that Headhunters are now getting lots of CVs from Synovate Business Consulting indicates that there is just very little hope in this division moving forward. The fat lady is not singing. She is sending her CVs... :)

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8 years ago

Thanks your insights & comments, another thought that crossed my mind with the current financial turmoil do you think it will have any effect on the IPSOS - Synovate deal?

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8 years ago

Interesting article, John. I wonder if anyone (other than the bitter Alvin Tan, who has obviously been snubbed by someone at Synovate) has any update on how the Ipsos & Synovate is going? It should now be more apparent to the staff and clients what the impact of this merger are likely to be in the short term.

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