Home Agencies Publicis-Omnicom Merger Is Official, A Bid For Scale And Digital Relevance

Publicis-Omnicom Merger Is Official, A Bid For Scale And Digital Relevance

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mergedPublicis and Omnicom have confirmed their intent to create a merger of equals. The two global ad agency holding companies will form a new entity called Publicis Omnicom Groupe – with ownership structured approximately 50/50 and a market capitalization of $35 billion U.S. (press release)

Speaking with press from Paris this morning, CEOs Maurice Levy and John Wren described the rationale for the mega-merger and how they’ll approach the 30-month timeline for completing it. Part of that rationale has to do with the influence of digital consumer platforms that are stealing share from traditional agency media brokers – and the need to create more segmented audience buys.

“When you look at these Internet giants and the billions of people who are connected, we are not using the classic approach,” said Levy in response to a question about the benefits of scale.

Levy added with no apparent irony that it takes billions in spend and a global investment in big data “to come up with a message that is relevant to a narrow audience.”

Wren added, on the topic of efficiency and agency globalization, “We’ll be creating pure scale in terms of merging markets [and] areas of production where we’re both capable but probably not globally complete.”

During the 30-month transition, Wren and Levy will be co-CEOs, after which time Levy will become non-executive chairman and Wren will become CEO. The new company will be incorporated in the Netherlands. Both men will sit on the board, and their companies will each contribute seven additional members.

Below, some highlights from the press conference.

Deal Approval

The reaction of French, U.S, and other national regulators cannot be anticipated with certainty until the deal has gone through clearances from the 40-plus countries in which both companies operate, but Wren and Levy sound all but certain it will meet with approval.

Wren scoffed at the estimate, uttered by one journalist, that the companies separately control 40% of the media spend in the U.S. In doing so he incidentally gave a nod to one of the big factors challenging the media agency business model – digital companies stealing share from the agencies.

“That’s a fantasy number… Five years ago Google, Facebook, Twitter didn’t even exist,” he said. “We have many new competitors today than we would have five years ago when someone was evaluating” the size of the market.

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What about the French? It was just a few months ago that regulators there scuttled Yahoo’s attempted acquisition of DailyMotion, seemingly resistant to the idea of a U.S. takeover of a French Internet company.

Levy said, “Yes we are one of the iconic French companies. We have informed all of the officials. The reaction we got from everyone was tremendous support. We don’t expect the French government will have anything else but great support.”

Conflicts

Wren was nonchalant about the overlap in client business, suggesting firewalls and conflict shops may be needed but that the companies would cross that bridge when they come to it.

“Shared clients contributed over $6.5 billion in 2012,” he said. “There will be the odd difficulty we’ll have to make commercial decisions about at some point. But it’s not overwhelming given the size and magnitude of this transaction.”

Despite those assurances, the men made few specific statements on the benefits of the deal to clients.

Wren offered, “From a client’s perspective, we’ll be able to do things better, faster, stay closer to what’s relevant in this very changing environment, and do it in a way that I don’t think we can be challenged in the way we might have been in a traditional sense.”

Advisors

Publicis and Omnicom used few financial advisors in putting together the deal, “frankly, because we didn’t need them,” according to Wren.

They used just one firm each, and credited this fact with helping keep the deal from being leaked.

Early Talks

Wren said his discussions with Levy began six months ago, and that Maurice was the first to bring up the idea of a mega-merger.

“Fundamental to the process was equality… recognizing that we were both representatives of many different interests,” said Wren. “Probably at the very top of that list are people we employ.”

He said there are no plans for layoffs.

However it’s hard to imagine the companies won’t undertake some streamlining of shared resources such as offshore production groups and agency trading desks. In the case of the latter, it may be that account teams will be kept in order to service existing  client and agency partners, while the centralized ad operations teams experience some headcount reduction across Vivaki AOD and Accuen. (Read more on the trading desk implications.)

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