We’ve all been assuming that the Omnicom/Publicis merger will sail through, eventually, once the pesky Chinese regulators (who held up the Dentsu/Aegis deal) finally say OK.
Alas this isn’t the only problem for Omnicom boss John Wren (left) and French ami Maurice Levy. Wren announced today, unveiling Omnicom’s slightly better than expected figures (revenue up 4.6 per cent), that the merged company had yet to gain approval from HMRC in the UK for tax residency here, a status it’s also seeking in the Netherlands where it proposes to be headquartered – for tax reasons. France is kicking up a stink too.
As a ‘nil-premium’ deal (shareholders don’t get anything apart from anticipated savings) this is potentially disastrous. But it’s hardly a surprise.
When Omnicom and Publicis announced the merger it looked a bit fishy that its financial HQ was to be the Netherlands, hardly its biggest market. Reason? A big tax saving presumably. Ireland would have looked a bit too obvious, I suppose.
Quite why it needs tax residency in the UK as well only Wren, Levy and their advisors know. But only a dimwit could have failed to note that UK chancellor George Osborne is busy cracking down (or appearing to crack down) on tax-dodging companies like Google, Amazon and Apple that sell loads in the UK but pretend the sales are made elsewhere – like Ireland or Luxembourg.
So the UK’s HMRC, for the first time in living memory, isn’t rolling over to make life easier and more ‘tax efficient’ for big American companies. And Omnicom/Publicis is nowhere near as big or important (in the UK government’s eyes) as Google or Amazon.
Could all this scupper the merger? Some analysts think it could, although they’re a rather excitable lot. Wren himself said that these issues and also China could a deal-breaker.
Omnicom’s DAS (other bits) division includes more PR firms and lobbyists than you could shake a stick at. No doubt they’ll be doing their best to turn things round.
Meanwhile arch enemy Sir Martin Sorrell of WPP will be laughing up his sleeve. Has Martin any pals at HMRC?