In Indonesia, Advertising spending will likely fall 67% this year, the Association of Indonesian Advertising Companies predicts. Thailand has seen spending plunge of over 30 per cent in the first half of this year compared with the same period last year. Billings for 1998 are expected to fall by 40 per cent from last year. South Korea is 36% down for the first half and still falling - TV spending in July and August is about half of last years. In Japan, major automobile and electronics firms are trimming budgets by up to 50%. Opportunities for acquisition abound, but caveat emptor.

In Japan, Interpublic have looked at least three agencies, hoping to find an entry point for Lowe. TBWA have been in talks with four agencies in Japan and at least two in Korea. Both Ogilvy and JWT have also been prowling for acquisitions. Publicis has an open check book.

Yet there have been surprisingly few acquisitions throughout the region. Perhaps the largest transaction was Omnicom’s January purchase of 20% of I&S, Japan’s #8 agency in an agreement that allows Omnicom to eventually acquire majority control if the agency’s financial performance meets their criteria. More recently, DMB&B bought 75% of Bangkok’s Siamese Advertising. In total, less than a dozen such transactions this year.

One of the reasons for the slow pace of M&A is that Western public companies have radically different ideas about how to value an agency than their less-experienced Oriental counterparts.

One tumbling Korean agency, on the block most of this year is looking for a Western owner who will not only recapitalize the company but also take on liability for about US$20 million in unpaid TV airtime bills, a troubled pension fund, an unfinished building, unpaid staff salaries, sundry other debts, and reward incumbent management by granting them valuable service contracts and a slug of equity.

Proposals from one family-owned Japanese agency called for the buyer not only to purchase the business as a going concern, but also pay a 20% premium "because Japanese agencies are not often for sale," an additional surcharge for the "quality of the agency’s media relationships," and even more for the " brand name value of a well established company." This potential deal fell part before the addition was even complete. Family owners at another troubled Japanese agency opted to double the price at the last moment, reflecting "the owners’ deep commitment to the future of the agency." No Deal.

Like wind-blown apples, the first crop of Asian agencies coming to market are the weaker fruit. A better harvest should fall the longer recession lasts, and the deeper the pain. The most interesting opportunities may well be in Japan, which still accounts for over half of Asia’s adex. The major media and industrial groups that control blocks of equity in many agencies are wondering if ownership or management of agencies really is in their long term strategic interests, especially when they may have much greater priorities for funds and management time. The decisions of the Seibu Saison group and Nippon TV to reduce their stakes in I&S opened a door for Omnicom. Similarly, the Mitsubishi Group’s decision to cede control of 7^th ranked Dai Ichi Kikaku was good news for Asatsu Inc, Japan’s rising #3 agency. At least three major and several large Japanese agencies are vulnerable to such changing views. Japan may soon be home to the sale of the century, and the winners will become major players in the world’s second largest ad market.