What Dentsu International's potential sale could mean for valuations and agency models

Japanese advertising giant Dentsu is reportedly exploring the sale of its international business, according to Financial Times sources. The move comes as the group evaluates strategic options, with potential buyers, including industry players and private equity firms, are already being approached.

While no final decision has been made, insiders say Dentsu aims to have a clear roadmap by year-end. Options under consideration range from selling a minority stake to a complete divestiture of its overseas operations. To manage the process, Dentsu has appointed Mitsubishi UFJ Morgan Stanley and Nomura Securities to identify potential buyers in what is expected to be a multi-billion-dollar deal.

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Meanwhile, a Dentsu source told Jiji Press that no decisions had been made, adding that the group was still reviewing various options to boost its corporate value.

A potential sale could significantly impact Tokyo-listed Dentsu, founded 124 years ago, and its long-standing ambition to compete on the global stage with industry heavyweights such as WPP and Publicis.

Just two weeks earlier, Dentsu Group released its second-quarter financial results for FY2025, reporting a net loss of 79.9 billion yen (US$541.9 million). The group also announced plans to cut around 3,400 jobs (about 8% of its overseas workforce) as part of a restructuring plan aimed at struggling international markets. The cuts are expected to primarily affect headquarters and back-office operations outside Japan.

“As part of the reevaluation of underperforming businesses, we have completed the identification of underperforming markets and entities and have begun taking the appropriate countermeasures,” said global CEO Hiroshi Igarashi in the results announcement.

“I am acutely aware that reforming the international business is an urgent issue. We have recorded an impairment loss on goodwill in the second quarter. I deeply regret this situation and offer my sincere apologies on behalf of the company," he added. 

A deeper look

Rumours about a potential sale of Dentsu’s international business have been swirling across M&A circles for a while. 

M&A specialist Hattie Marsden, founder of TruWater Advisory added that in the past three years, Dentsu International has gone from being one of the most active acquirers in APAC of marketing services businesses, to having done no material publicly recorded acquisitions, signaling a shift in confidence of Dentsu HQ in the international business.

Pulling out the numbers, she shared that post COVID, in 2021 Japan surged back (+18% organic growth, record revenue, ~23% margin), pulling ahead again in profitability. And while international markets recovered slightly, the margins stayed much lower. A year later in 2022 while international drove top-line revenue (~60% of the group), it remained structurally less profitable (high-teens margin). Japan, though smaller in revenue (~40%), delivered far higher margins (mid-20s).

In the past two years alone from 2023 to 2025, Japan delivered nine straight quarters of growth and record profits, while international slipped back into negative growth across all major regions. Marsden explained these numbers bring the potential sale of Dentsu International into context that for years the overseas arm has delivered scale but struggled with margins, impairments and growth. Japan, in the meantime, has consistently outperformed on profitability. Marsden said:

Whether it’s good or bad ultimately depends on one’s perspective but selling would mean stepping back from Dentsu’s global dreams. On the plus side, it would enable it to focus back onto its core.

What this means for the wider business

If Dentsu International ends up being broken and sold in parts, Marsden said it could flood the market with agency assets, putting pressure on valuations in the short term. However, it could also spark a wave of strategic and private equity acquisitions, especially in CXM and digital.

“It could be the biggest shake-up in agency M&A since the rise of Accenture Song. Either way, if Dentsu really moves ahead, the ripple effects will be felt across holding groups, consultancies and private equity alike. In many ways, the fate of Dentsu International is a test case for whether the traditional global agency models will makes sense,” Marsden said.

It is also well known that the advertising industry is undergoing rapid transformation and faces significant challenges, prompting agencies to reshape their businesses for profitability and to capitalise on AI-driven opportunities.

“Consolidation and realignment trends continue, exemplified by Stagwell’s acquisition of ADK Global,” said Leela Nair, CEO of Ebiquity. In this context, Dentsu’s exploratory pivot—focusing on innovation and investment in Japan while exploring new ownership for its international assets—reflects a potential strategic, forward-looking response to limited net wins in Q1-Q3 2025, she said.

“The potential sale could attract interest from rival advertising companies, private equity firms, and other investment groups. Even if Dentsu sells, it will keep the Dentsu branded agency assets in Asia, to service important Japan based clients such as Toyota, Shiseido and the likes,” explained Nair.

Goh Shufen, founder of R3 shared that despite its struggles overseas, Dentsu played an important role in representing the Asian perspective, the Asian way of doing business, building brands and building relationships.

"Clients benefit from having global diverse options, it’d be better for all I if the buyer is from Asia," she said. When asked what the retreat indicates, Goh shared that Japanese brands have often relied on Dentsu to build their brands consistently overseas. "Now they’d have to ramp up their own brand and agency management, something not as developed as other markets," she shared.

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