Interpublic’s purchase of planned purchase of 20% of Japan’s fifth largest agency, Daiko Inc, catapults Lowe Lintas to a prominent position in Japan’s advertising industry. But it also leaves some loose ends and unanswered questions.

Daiko will be Lowe Lintas’s third platform in Japan. The Lintas merger bequeathed them a minority joint venture with Hakuhodo, HakuhodoLintas Inc, whose main client is Unilever’s Japan subsidiary Nippon Lever. There is also another minority joint venture with Standard Advertising, now less than a year old. Some rationalization may be in order in the months ahead.

Daiko, according to sources, was an opportunistic buy. For much of last year IPG were busy trying to re-establish the relationship with Hakuhodo they abruptly terminated when they dissolved the McCann Erickson Hakuhodo joint venture early in 1994, but Hakuhodo would have none of it. And so when the financially troubled Kintetsu Railway company decided to offload most of its equity in Daiko, IPG were quick to follow through.

On paper at least, the purchase consolidates IPG’s position as the leading foreign agency group in Japan. Apart from McCann Erickson, Japan’s 10th ranked agency, IPG also own IPR, the second largest PR firm after the Dentsu PR Center, and Infoplan, a leading market research company. The deal also provides Lowe with access to a roster of Japanese clients, including Matsushita Electric, Japan's leading electrical appliance maker, the Daie, Japan's largest national supermarket chain, and a host of other clients centered around Japan’s second city Osaka, where Daiko is headquartered.

But delivering the performance this greater clout promises may not be easy. Daiko is a deeply conservative media-oriented agency with little international exposure. Now that Kintetsu has largely withdrawn, the Asahi Shimbun newspaper becomes the dominant shareholder. Daiko is important to the Asahi for the help it gives in selling advertising space in the newspaper across Western Japan. But, according to Asahi sources, the relationship is a financial millstone for Daiko. A couple of years ago the Asahi forced Murdoch to sell back equity he had acquired in Asahi TV, a related company. Times have changed, but Asahi executives are not overjoyed at the arrival of another foreign partner.

The benefits of partnerships with major Japan agencies can be slow in coming. Last year, I&S Corp, although 49% owned by Omnicom and aligned with BBDO temporarily scotched plans to launch OMD in Japan and also aborted Omnicom’s plans to open a new brand strategy consultancy. More recently, when BBDO proposed that the agency’s Account Executives stopped calling themselves ‘Salesmen’ in and adopted the moniker Account Service or Client Service, the proposal was vetoed in a popular vote. And even WPP is said to be occasionally frustrated at the slow pace of developments with Asatsu, of whom they also own about 20%.

IPG’s investment at least guarantees the future of Daiko, but whether IPG will be able to persuade their partners to restructure the agency to improve profitability and productivity is questionable. As one senior executive in a major Japanese agency put it, " Daiko will be greatly strengthened by IPG’s investment, but it may be a very long time before IPG see any benefit themselves."