Ten Things You Need to Know About the Publicis-Omnicom Merger
1. Cuts Are Coming. The new company will have a market cap of $35 billion and more than 130,000 employees. Over the weekend, executives said they plan to realize $500 million in efficiencies via the merger. “Publicis Groupe is known to run a lean organization, so much of those cuts may occur within Omnicom,” reportsAdweek.
2. Two Bosses. Initially, Maurice Levy of Publicis(PUBGY) and John Wren of Omnicom (OMC) will serve as co-CEOs of the merged company—creating a potential management challenge immediately seized upon by competitors. “Co-CEOs is not an easy structure, as history proves,” Martin Sorrell, chief executive officer of rival WPP (WPPGY), said over the weekend.
3. An Alpine Pact. The surprising deal was originally hatched at an unsurprising venue: the World Economic Forum in Davos, Switzerland. “It was not calculated, it was just an encounter we do socially from time to time” at first, said Levy of Publicis. “We had another encounter, and in the meantime started to think ‘What was this stupid idea?’ And looking at things, it wasn’t that stupid.”
4. Conflicts Ahoy. In the wake of the merger, the new company will represent both Coke (KO) and Pepsi(PEP). Ditto Verizon (VZ) and T-Mobile (TMUS). “Industry execs say the biggest conflict to watch is the beverage giants,” reports Ad Age.
5. Size Can Hurt. Larger scale might give the merged giant better negotiating leverage when buying traditional ad space. But there are potential downsides as well. “When the bulk of the enterprise’s activity is still about finding, creating and executing inspirational ideas to motivate the world’s population to choose one brand over another brand, there is a point beyond which scale can actually be a disadvantage—talent feels lost, ideas get killed by people who have no idea what the clients’ needs are and everything takes too long and costs too much,” writes Richard Pinder, co-founder of The House Worldwide. “Well that’s what a large number of large clients have been telling me this past two years since I left Paris as COO of Publicis Worldwide.”
6. Not So Fast. The deal still faces a number of regulatory hurdles.
7. Not So Big. What looks like a giant in the ad world looks much smaller when compared with new, emerging rivals in the realm of advertising technology. “Between them, Omnicom and Publicis accounted for $22.7 billion in revenue last year, more than the next highest ad firm, WPP,” reports the New York Times. “But no ad company comes close to the $50 billion in revenue that Google made last year, largely on the strength of its advertising business.” (Another take from Businessweek on the not-so-flattering comparison to Google (GOOG).)
8. Tech Won’t Tremble. Despite the comparisons with Google, don’t expect the deal to shake up the ad-tech industry. “I think it’s a total misdirection to think that you can leverage the scale and advantages of big data if you’re bigger. Quite the opposite,” Simulmedia’s Dave Morgan tells All Things D. “These aren’t technology companies, and you don’t get better tech development out of consolidation. You’re not going to create the next MediaMath, or Videology, or Facebook(FB), or Google out of this.”
9. A Rare Feat. The deal didn’t involve the participation of a single large investment bank.
10. Up Next: More Ad M&A. The merger is expected to spur more deal-making in the industry. “The world of advertising has a new top dog,” notes the Economist. “It may not have bragging rights for long: given his track record, it will be no surprise if Martin Sorrell, WPP’s boss, soon pulls another deal out of his hat to return his firm to the top of the ‘Mad Men’ league.”