Advertisers’ body welcomes collapse of Publicis Omnicom merger

The body representing the interests of British advertisers, ISBA, has welcomed the collapse of the £22.8bn merger between Publics and Omnicom, claiming it will allay brands’ concern over market dominance. 

Publicis Omnicom

Publicis Groupe and Omnicom have today (9 May) pulled the plug on the deal blaming the “difficulties in completing the transaction within a reasonable timeframe”. It is thought tax issues and the challenges in bringing together two different cultures proved to be the major stumbling blocks.

In a joint statement, chairman and chief executive of Publicis Groupe Maurice Lévy and John Wren, president and chief executive officer of Omnicom Group, say: “The challenges that still remained to be overcome, in addition to the slow pace of progress, created a level of uncertainty detrimental to the interests of both groups and their employees, clients and shareholders.”

The £22.8bn merger was proposed nine months ago and had gained unconditional regulatory approval from all major competition authorities 

It would have brought agencies including Saatchi & Saatchi, BBDO, Leo Burnett, BBH, Interbrand, ZenithOptimedia, OMD and Starcom MediaVest together.

It was hoped the “merger of equals” – which would have created the world’s largest marketing services group pushing WPP into second spot – would have generated $500m (£325m) of efficiencies due to synergies between the two. It was also hoped a pooling of resources would allow the two to better compete with digital advertising giants Facebook and Google. 

The deal was also sold as offering advertisers greater choice and media buying power.

Agency wise, analysts argued the merger would have provided them with greater leverage when negotiating fees with advertisers amid suggestions the balance of power had shifted to clients.

A merger would have presented possible conflicts of interests, client wise, including Coca-Cola and Pepsi, McDonald’s and Yum Brands, Google and Microsoft, Procter & Gamble and L’Oreal and Mars and Nestle.

Ian Twinn, ISBA’s director of public affairs, says UK advertisers will be relieved the two appear have taken into account “the potential impact that the merger would have had on their clients and the market.”

He adds: “When news of the potential mega-merger surfaced last year it raised client concerns about market dominance, with the impact that POG’s increased power might have on many advertisers as their primary route to media.

“We also raised concerns that the merger would inevitably lead to some significant rival client conflicts, a concern which at the time seemed to be unavoidable.” 

Forrester’s CMO practice leader David Cooperstein agrees clients should welcome the development. 

”The minimal advantages of the merger – scale and succession planning – were likely outweighed by the disadvantages of being able to execute on such a complex and hastily arranged deal. Media buying power and back office saving do not outweigh client service and the cultural barriers of two global holding companies. Most clients and partners will be relieved.”