Publicis & Omnicom...The Real Mad Men

May 9 2014, 11:00am CDT | by

If a week is long time in politics then 10 months must be an eternity in business…especially a business where the principal objective is to shine a light on commercial activity.

Go back to a balmy summer evening in Paris, on Sunday, July 28th 2013 Maurice Levy, the head of French advertising firm Publicis and Omnicom’s Chief Executive Officer (CEO), John Wren, signed a deal that was aimed at creating the biggest advertising company on the planet.

Before the planned merger the leading European and American advertising agencies by market cap were:

#1: WPP Plc (UK)                                     USD28.756Bn

#2: Publicis SA (France)                      USD17.751Bn

#3: Omnicom Group Inc. (USA)       USD17.245Bn

#4: Interpublic Group Inc. (USA)   USD  7.392Bn

Had the merger proceeded, the new company would have commanded a market cap value of USD35Bn, some 21.7% larger than WPP Plc.

Broken Dreams; Conflicts of Interest:

Sadly, dreams of this nature can often become nightmares and unravel before they are fulfilled. It was announced today (May 9th 2014) that Publicis and Omnicom, had decided to scrap their planned merger.

It was said that the merger was abandoned owing to challenges that “…remained to be overcome…” Indeed the glacial pace of progressing toward a resolution had been creating a high level of uncertainty for the two agencies and their clients.

If the merger had progressed, then many, once active, independent agencies would have been struggling for space under the collective umbrella. It is hard to fathom how the creative talents and temperaments of Saatchi & Saatchi, BBDO, Leo Burnett, BBH, Interbrand, ZenithOptimedia, OMD and StarcomMediaVest could have functioned effectively and efficiently under one roof.

It appears to be an irrelevance that the potential Publicis Omnicom Group assured clients the new group represented  a “..merger of equals…” that would have delivered synergistic benefits from    “…the most comprehensive offering of analogue and digital services…”.

Advertising is clearly an industry where the client’s needs are supreme and one look at the duplication of industrial sector leaders that would have been on the combined client list indicated how serious the issue of a conflict of interest could be  no matter what scale advantages were on offer. The roll call of client billings included:

Coca-Cola and Pepsi, McDonald’s and Yum Brands, Google and Microsoft, Procter & Gamble and L’Oreal and Mars and Nestle.  Just from watching the latest issues in Mad Men where two offices of a single firm cannot agree  one can begin to appreciate how the Goliath  may have found itself having to pitch again to retain existing business.

However, can the combination of two such powerful firms really be seen as equal? One could point to the fact that Publicis’ Maurice Levy and Omnicom’s John Wren had proposed that they would serve as co-CEOs for the first two years of the companies coming together. After then it was suggested that Maurice Levy would have become Non-Executive Chairman. However, one cannot help but speculate that that would have been one Non-Exec role that had to allow for some fairly active hands on influence. Surely a course that would have profusely irritated the CEO! It cannot be overlooked that the legal costs were mounting on both sides and there is talk of strained disagreement as to who would be the highly influential Chief Financial Officer.

Could this “Spruce- Goose” have flown?/>/>

We will never know how the super ad agency would have fared. Would the competing clients have been assured as to the insulation quality of the creative melting pot?  Probably not, there would have been some losses …but it is likely that they could have been tempered by other account wins. As the dust has settled today it is clear that both parties are trying to sing from the same hymn sheet as they blame the merger collapse on “…difficulties in completing the transaction within a reasonable timeframe…”.

In theory one could point to the efficiency of scale that could have been achieved in areas such as technology and media buying … but once again the issue of prime slots being given to one client over another could have led to both internal and external friction and an eventual loss of shareholder value.

Publicis and Omnicom have said that looking ahead they will have to accept that they are competitors…yes, I see that when it comes to chasing clients and improved billings… probably also in future when they separately chase new, but smaller acquisition targets as they try and close in on the still, unchallenged number one, WPP Plc…with that in mind it will probably be a superb weekend for Sir Martin Sorrell.

Stephen Pope – MarketMind

 
 
 

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