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Keith Hunt (below) is managing partner of Results International. He examines the likely fall-out of the Omnicom/Publicis merger and the possible reaction from rivals including former world marcoms leader WPP.
This must come as one of the biggest surprises of all time for the sector. You can bet a lot of people at the top of both networks will be feeling massively unsettled hearing this news over a summer weekend.
I might well be proven wrong, but my first reaction is one of incredulity. When you get to a certain size there are ever decreasing economies of scale in lumping together two already huge businesses like Omnicom and Publicis. However if it does happen it will usher in a massive period of uncertainty and even worse, if referred to the regulators, a period of stasis. There comes a point where big can be too big.
Other commentators have spoken about their combined media buying power as a major rationale but as each is already very big there must be a limit to how much more you can squeeze the media vendors.
The other point to bear in mind is that often the biggest barrier to doing a merger is the CEO. John Wren and Maurice Levy, the heads of Omnicom and Publicis respectively are both elder statesmen, though Levy is the older of the two, born in 1942. There has been much talk around succession planning. Logically Levy would potentially be on the brink of retirement and if this were to happen, the CEO issue would be solved.
For the multiple agencies within each network, not much is likely to change. It would be an almost impossible and unpalatable task to think about combining them, such is the issue of client conflict. There is already a system of conflict shops in place to handle competing global accounts and such clients would certainly be resistant to changes that would upset the balance that has been carefully put in place. I can see no benefits therefore in combining agencies within each network. It would potentially open up a Pandora’s box.
A potential benefit of the merger however may hinge around technology. 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.
Emerging markets is another potential benefit area. Each network has been making acquisitions there but WPP is ahead of the pack. It’s not a reason in itself to undertake a merger of this kind but it would take the combined group into pole position.
By Keith Hunt. Keith is managing partner at Results International – global M&A advisers in the marketing communications and adtech space.
