Ad Agencies Omnicom, Publicis Announce Merger In Effort To Increase Digital Presence

Ad agencies Omnicom and Publicis yesterday announced that they had "agreed to merge" in a $35.1B "cross-border linkup that shows how Big Data is making Madison Avenue look more like Wall Street," according to Vranica & Bender of the WALL STREET JOURNAL. The merger is "aimed at restoring the balance of power" between ad agencies and Silicon Valley companies such as Google and Facebook. Data from measurement firm eMarketer shows that about "22% of global ad spending now is digital." Omnicom and Publicis "hope that by joining forces, they will be better equipped for an industry increasingly dominated by data-driven analysis and automated trading of ad space." Omnicom President & CEO John Wren and Publicis CEO Maurice Lévy are "to be co-CEOs for 30 months, after which Mr. Lévy ... is slated to become nonexecutive chairman and Mr. Wren to continue as CEO." The company will "be called Publicis Omnicom Group." The "hope is to close the deal" in Q4 this year or in Q1 of '14 (WALL STREET JOURNAL, 7/29). In N.Y., Tanzina Vega notes the merger signals that advertising is "now firmly in the business of Big Data: collecting and selling the personal information of millions of consumers" (N.Y. TIMES, 7/29). In Chicago, Robert Channick notes the merger sets the stage for "cooperation, consolidation or another story line yet to unfold." The companies said that the transaction "would generate the necessary scale to deal with technology changes that have challenged the advertising business in recent years." Other deals "might follow." Experts said that current ad industry leader WPP "could make a move for U.S.-based Interpublic Group, France's Havas Group or Japan's Dentsu" (CHICAGO TRIBUNE, 7/29).

TIMES THEY ARE A CHANGIN': Lévy today said the deal is an "excellent combination for our clients," and the merger is "something which will help them cope with all the changes which are happening in this world, particularly with the Internet giants." Wren said the marketplace "has moved and it changes every day now." Wren added, "Up until ten years ago, it didn’t change very rapidly, you had time to absorb the changes. (Now) changes are instantaneous." Lévy noted there is "certainly a path to go through" in getting the deal approved by regulators, especially in France, but "we do not anticipate any major hurdles." Wren said it is "possible" the newly combined firms could lose "key clients." Wren: "Most clients are pretty comfortable and long ago have they gotten past the conflict issue because as an industry, everyone of us, including our competitors, has learned to build firewalls to solve some of those issues." Lévy said he and Wren have called many of their clients informing them of the deal and the reaction has been "overwhelming and extremely positive because they see … the benefit for them" ("Squawk on the Street," CNBC, 7/29).

BALANCING ACT: VARIETY's Brian Steinberg noted whether all the "clients of both concerns remain with the new entity remains to be seen." Advertisers have "long been known to be loath to dock their ad business with agencies that also work with their competitors" (VARIETY.com, 7/28). In Chicago, Sandra Guy notes rivals such as Pepsi and Coca-Cola, as well as McDonald’s and Yum! Brands, "will see their ad agencies fall under single ownership." Experts said that they "expect the companies to continue to operate as their own independent businesses; that cost-cutting will first hit corporate jobs such as legal, accounting and IT at the headquarters level, and that the public relations companies might be most ripe for downsizing." Omnicom will "benefit from Publicis’ strategic shift in the last few years toward digital operations" (CHICAGO SUN-TIMES, 7/29). WPP CEO Martin Sorrell said, "Time will tell if the cultures will click and clients and talent benefit." Execs said that "layoffs are likely to be minimal" (WALL STREET JOURNAL, 7/29).