Publicis Omnicom merger could create ‘major’ client conflicts

The £22.8bn merger between Publicis and Omnicom to create the world’s biggest advertising group has the potential to create “major” conflict between the brands the agencies count amongst their many clients.

Publicis Omnicom

Publicis Ominicom Group will bring together agencies including Saatchi & Saatchi, BBDO, Leo Burnett, BBH, Interbrand, ZenithOptimedia, OMD and StarcomMediaVest under one banner.

Among the potential conflicts on the combined Publicis Omnicom Group’s client roster include Coca-Cola and Pepsi, McDonald’s and Yum Brands, Google and Microsoft, Procter & Gamble and L’Oreal and Mars and Nestle.

Publicis Omnicom Group has assured clients the new group marks a “merger of equals” and will benefit them by bringing together “the most comprehensive offering of analog and digital services”.

At a press conference announcing the deal, Publicis CEO Maurice Levy said both companies had years of experience in setting up “strict firewalls” to protect client interests. He emphasised “this is a new company for a new world”, with the ability tackle the development of new internet giants, changing consumer behaviour, the blurring of roles of all the players in the market and the explosion of big data.

A P&G spokeswoman appeared to endorse the deal, saying: “This merger will put the group in a strong place globally. However, it still needs the approval of the regulators and until then we do not plan to comment further.”

Other Publicis Omnicom clients were contacted by Marketing Week, but did not reply in time for publication.

The merger is expected to create $500m (£325m) of efficiencies due to synergies between the two companies, which could include a reduction of the group’s now 130,000 headcount and the shedding of some accounts.

The transaction – which will create a market capitalisation of £22.8bn, dwarfing the previous largest advertising group WPP’s £15.6bn stock market value – is subject to approval by shareholders and regulators and is expected to close in the fourth quarter of 2013 or first quarter of 2014.

Publicis’ Maurice Levy and Omnicom’s John Wren will serve as co-CEOs for the first two years of the companies coming together. After that time, Levy will step back to become non-executive chairman. The company will be headquartered in the Netherlands, for neutrality and possible tax advantages, but will continue to be operated from Paris and New York.

David Cooperstein, Forrester’s Practice Leader CMO, says the merger of the two companies should provide marketers with more diverse choice to work with leading agencies under one holding company umbrella. Also, a larger media buying centre should mean better negotiating power for paid placements and technology services.

He adds, however: “There are major – though predictable – negatives, in the name of more client conflicts and less negotiating power on fees. Once the client conflicts are worked out, multi-national marketing purchasing departments will struggle to negotiate if they want the scale and depth of holding company relationships.”

Keith Hunt, managing partner of M&A advisers Results International, says a benefit of the merger may hinge around technology.

He says: “Each of the big networks, but particularly Publicis, has been looking hard at how to invest directly into tech and tech platforms. By doing this they can broaden out their offer from one of digital marketing services to deliver technology as well. This could allow them to go head to head with businesses such as adobe. The combined buying power of an Omnicom/Publicis behemoth would provide the funds to make significant acquisitions to deliver on any ambitions in this tech space.”

WPP CEO Sir Martin Sorrell said while the proposed deal is a “bold, brave and surprising move”, “time will tell” if the cultures will click and whether clients and talent will benefit.

David Jones, chief executive of Havas, also questioned whether the deal will be in the best interests of client or their talent.

He added: “Clients today want us to be faster, more agile, more nimble and more entrepreneurial, not bigger and more bureaucratic and more complex.”

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