Fallout from the Publicis/Omnicom merger

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Richard Pinder writes: When first hearing the Publicis and Omnicom merger rumours you could have been forgiven for thinking it to be some silly season gossip.

But as we know POG is not a passing fancy, it is for real. Hats off to Maurice Levy who has consistently shown his ability to be daring, decisive and dynamic just when people least expect it.

So what drove it? And who are the winners and losers? First, two sets of observations:

The announcement was made in Paris, not New York. The Group will be called the Publicis Omnicom Group, not the Omnicom Publicis Group. The revenues of Publicis Groupe are some way below those of Omnicom Group though their market caps are much closer, but it will be a merger 50/50 owned by the two companies shareholders.
After the dust has settled and the merger is done, the silly co-CEO thing is finished with and the company starts to operate normally, the CEO will be John Wren, from Omnicom, the CFO likely to be Randy Weisenberger from Omnicom, the ticker marker on the NYSE will be OMC and largest market for the combined entity will be the USA.

Once the incredulity subsides, you can see the attraction to Maurice and John. And as the above simple summary shows, you can see the game that is being played by both to get the other to agree to the deal. The former gets to show the French establishment what world class really means, a brilliant retirement gig as non executive Chairman of the world’s number one advertising group and without having to go through with the charade of making good his oft delivered promise to Jean-Yves Naouri to be his successor. The latter, within 30 months, gets to run something nearly double the size of OMC today, in seriously good shape in Digital and Emerging Markets, the number one ad agency of the number one spending client in the world – P&G who had only just taken most of their business from OMC – and all without the pain and risk of taking the long road there.

For Elisabeth Badinter it’s a fabulous end to her tenure as Chair of Publicis – seeing the company her father founded in 1926 become number one globally, as well as securing the very strong valuation on her holding that today’s Publicis stock price provides. For a number of senior managers there will likely be the triggering of various unvested options, stock grants and other goodies, not to mention the special dividends, that will mean good will all round. So, off on the August vacances with a spring in their step? Well not everyone…

For a start there is precious little in the announcement about WHY this is better for clients. We can see its better for doing deals with the big media partners, old and new. Scale counts there. But 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. 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.

There is also the small matter of the $500m savings mooted in the announcement. Publicis Groupe runs lean. Margins are already industry best. So the chances of finding much of the savings there seem slim. It will be interesting to see how the board of BBDO reacts to the likely loss of their top tier international travel rights, or the agencies of DDB cope with tough bonus rules that tie every unit in the company to the performance of those around them, as happens at Leo Burnett or Publicis today.

As a footnote on the winners and losers, spare a thought for those who fought, lost and thought they had won in the long-running soap opera called Maurice Levy’s succession. Just as the game looked like it would soon be over, the sport got changed and everything was different.

It will also be fascinating to see what WPP do about this. They have got used to being the world’s largest and Sir Martin is rarely quiet for long on any topic, let alone one so close to home. Bookies will surely be giving poor odds on a shotgun WPP/IPG or WPP/Havas union.

And me? Well as client choice reduces, the need for new global alternatives will continue to increase. It’s why we started The House Worldwide and its why we think it will increasingly be relevant to more clients who want to get back to a world where the client and the brand are more important than the agent promoting it and where the money is better off going to the talent than to the accountants counting it.

Bigger and smaller, that’s the future of the ad network game.

Richard Pinder is co-founder and CEO of The House International. He was formerly the head of Publicis Worldwide.

This post first appeared on Stuart Smith’s blog The Politics of Marketing

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4 comments

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    I think Richard’s overall view is correct. I haven’t seen a mention in all the coverage this merger announcement has generated about any potential benefits for their clients. Also, no discussion of creative issues or even of the involvement of any creative talent in the process. It would seem to be all about the numbers. And Richard is also spot on about clients perhaps starting to feel they’re getting enough choice or much attention (especially if they are Global but relatively small brands?). We have just been handed a great creative/production brief for a high-profile brand that the client didn’t think was getting enough care and attention in their agency of record. There isn’t presently any suggestion of decoupling account planning or media planning/buying, but clients are getting much pickier about just who is responsible for the creative product or ‘output’. It seems they actually do have the choice to take this away from even the largest agency group now.

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    This is the closest ‘to the truth’ commentary I’ve seen so far. Richard’s inside insight adds weight to the observations. Having worked at length for both companies I cannot see how the different cultures of the two organisations will meld. Certainly the seniors at the BBDO’s and DDB’s will find a very much more restricted environment to work in should the new group follow Publicis practises.

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    The merger is about hitting back at their digital disruptors. Scale is important but leverage is even more important: POG will control about $100 billion in global ad spend. The ad agencies are waking up, they realize they control the purse strings. They don’t want to be stuck holding the handbag.

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    Richard Pinder = Spot.On.