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Omnicom/Publicis merger creates $30b ad agency, but hurdles lie ahead

Stockhouse Editorial
0 Comments| July 29, 2013


On the face of things, announcing that you’ve just created the world’s largest advertising agency may seem like a good time to pop champagne corks, but the devil in the details of the new merger between Omnicom Group (NYSE: OMC, Stock Forum) and Publicis Groupe (PUBGY, Stock Forum) may yet rear an ugly head.

Competition advocates in the United States and Europe are already circling the deal, said to turn the two companies into a cross-continental $30b juggernaut.

And fans of TV’s Mad Men will be acutely aware of what happens when two ad agencies with clients in similar industries have to make a judgement call over who they’ll continue to serve and who they’ll have to ‘fire’ to avoid conflict of interest issues.

Omnicom, which started in 1986, needs the deal to be competitive in the digital world, with Publicis having acquired several large digital players in recent years, while Publicis, which is heavily dependent on aging CEO Maurice Levy’s leadership, gains access to a much more solidified corporate structure.

Between the two companies, they own agencies such as BBDO Worldwide, TBWA Worldwide, DDB Worldwide Communications (Omnicom), Leo Burnett Worldwide and Saatchi & Saatchi (Publicis), as well as PR firms Porter Novelli and Ketchum, and Fleischman-Hillard.

And even if the new company manages to avoid government intervention and throwing billions of dollars of business (such as Coca-Cola (NYSE: KO, Stock Forum), Yum! Brands (NYSE: YUM, Stock Forum), McDonalds (NYSE: MCD, Stock Forum), Procter & Gamble (NYSE: PG, Stock Forum) and Pepsi (NYSE: PEP, Stock Forum)) back to the competition, how does a two-CEO company (as bosses Levy and Omnicom boss John Wren plan to run things) keep from infighting and split direction?

The two companies took in a combined $22b in revenue last year, or just under half of Google's $50b in ad revenues.

Darren Herman, the chief digital media officer at the Media Kitchen agency told Tanzina Vega of the New York Times the merger was 'not a reaction to competition in the advertising industry but rather a move to fortify against the likes of I.B.M., Google, Salesforce, Adobe and Oracle' in the area of big data.

The two companies plan a conference call for 2:30pm ET today.

- Chris Parry, Stockhouse.com

Tags: ADVERTISING AGENCIES

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