A marriage made in heaven or impending train wreck?

There are some deals that transcend the normal run of business and some developments that become indelibly etched on your consciousness - and, yes, some stories that drag trade journalists into the office on a Sunday tapping out copy.

There are some deals that transcend the normal run of business and some developments that become indelibly etched on your consciousness – and, yes, some stories that drag trade journalists into the office on a Sunday tapping out copy.

Today's announcement about the planned merger of Omnicom and Publicis is one such story. It's the biggest deal in the history of marketing services companies, creating a company of 130,000 employees with newly combined 2012 revenues of $22.7 billion, and a market cap at close of trading on Friday of $35.1 billion.

Such a mega deal raises so many questions and points of interest. Firstly, it was interesting that it was billed as creating the world's leading company in “communications, advertising, marketing, and digital services.” Relegating advertising to take second billing cannot have come easily to the folks at Publicis and is a definite sign of the times about where paid media sits in the order of modern marketing priorities.

From a PR point of view, there will be renewed speculation about the future of Omnicom's Porter Novelli brand as a standalone unit. Will the newly convened Publicis Omnicom Group PR subcommittee feel it needs four major PR networks - and what about smaller players such as Marina Maher Communications, Cone Communications, and Kreab Gavin Anderson? Some may be merged: some may be sold.

The overall deal brings together a fascinating mix of very different cultures. This was highlighted by the nature of the announcement in Paris, and the slightly incongruous images of the flamboyant Publicis Groupe CEO Maurice Levy and the more staid, former accountant Omnicom CEO John Wren engaging in a love-in at the press conference in Paris.

Levy is an entrepreneur, a swashbuckling risk-taker, and a visionary. He is also a natural communicator and innately understands the worlds of advertising and marketing. He has built Publicis through an aggressive acquisitions strategy, especially in emerging markets and in the world of digital.

Wren is a risk manager; a number-cruncher. He is not an entrepreneur and not a natural communicator. He has surrounded himself with former accountants, such as CFO Randall Weisenburger, and Dale Adams, chairman and CEO of the holding company's Diversified Agency Services unit. The suspicion is he could bring his specific business skills to bear in any industry.

Omnicom is under-represented in China and has chosen to grow its digital offer organically rather than through the high-profile acquisitions such as Razorfish, Digitas, and LBi favored by Levy.

So is this a marriage made in heaven, with two opposites completing each other? Or is it a train wreck waiting to happen, as two fundamentally opposing cultures attempt to merge and prosper together? Only time will tell and, honestly, at this stage nobody really knows - the only sure thing is that it won't be easy.

You can see the difference in approaches by the way both parties' senior PR executives reacted when PRWeek spoke to them after the deal was announced. MSLGroup CEO Olivier Fleurot was full of Gallic excitement about the exciting challenges and opportunities ahead to work with his “new brothers and sisters”; the Omnicom folks were much more guarded and chose to keep their thoughts to themselves.

Dave Senay will not be amused that his agency's name was spelled incorrectly in the press release (Fleishman-Hillard instead of its heavily touted rebranding as FleishmanHillard) and in the accompanying press kit (incredibly, Fleischman Hilliard).

MSLGroup subsidiary Kekst and Company was spelled Keskst in the release. Clearly this announcement was rushed ahead of schedule because the merger story started breaking on Friday evening, but this is sloppy work for a company that is all about communication and branding. It also speaks to the status of PR in both organizations.

In the meantime, and until the deal is ratified, the PR agencies are still toe-to-toe competitors in the market, no matter what subcommittee conversations are going on behind the scenes.

One can't help but feel that the repeated assertion in the announcement that this is a “merger of equals” was a case of protesting too much and a sop to the French regulatory authorities that must approve the deal before it is formally ratified. Competition authorities will look particularly at the media buying clout of the new group, which will suddenly control an eye-watering 40% of global media spend.

Levy and Wren will be co-CEOs for 30 months before Wren takes over as sole CEO and Levy moves upstairs to become non-exec chairman. Levy has effectively found his successor, albeit from outside Publicis and a non-Frenchman.

Putting Publicis first in the newly formed group name was another nod in the direction of the French, although the “e” has disappeared from the word “Group.” Shareholders from both groups will each hold “approximately 50%” of the new company's equity (whatever that means), but make no mistake; Omnicom is the senior partner in this arrangement.

The deal promises $500 million in “efficiencies” from future “scalability and internal synergies.” And, indeed, there will be undoubted savings from sharing services such as telecoms, IT, and property portfolios. But Omnicom has always prided itself on its decentralized structure and there will be much cynicism about whether these savings can be achieved without job losses and closing or merging agencies, especially in such a people-oriented business.

Client conflict is another stumbling block. Apparently key clients were informed before the announcement, but it will be especially interesting to see how the likes of Coca-Cola and Pepsi, Procter & Gamble and Unilever, Microsoft and Google, and AT&T and Verizon react to the fact that they will suddenly be using agencies in the same holding company umbrella network as their deadly rivals.

Publicis Omnicom Group insiders will tell you the newly combined entity will have six major ad networks through which to work and manage conflicts, and that clients are already used to different networks in the same holding company working with their competition.

Competitors, such as Havas CEO David Jones, will say this situation is untenable and not in the best interests of big clients – at least, he will say this unless and until Havas gets involved in another similar agency consolidation deal down the line.

Either way, you can be sure Jones, Martin Sorrell at WPP, and Michael Roth at IPG will already be circling their wagons and looking at opportunities to step in and exploit any uncertainty caused by the mega merger. And how will Dentsu react as it attempts to build a PR network to rival the established players?

Sorrell's public pronouncement to PRWeek about the deal was magnanimous about his old rival Maurice Levy, but contained the usual drip of poison as a sting in the tail about the co-CEO arrangement and new opportunities for WPP to exploit.

He certainly won't enjoy being relegated to number two position in the holding company stakes and there will be inevitable speculation about possible bids or link-ups with IPG or Havas. Any deal with IPG would likely be a hostile one, as it is well known that Sorrell and Roth dislike each other – but anything can happen in business and strange bedfellows have emerged before.

The fact is that Publicis and Omnicom realized each group on its own was going to find it more and more difficult to compete, especially in a world where “frenemies” such as Google, Amazon, and Facebook have established market capitalizations way in excess of any marketing services company.

Marketing services networks buy huge amounts of media on these properties, but the digital behemoths also compete directly with them and have negotiation powers and weight in the market way beyond any media or marketing group. This is just one more reason why this probably won't be the last mega-deal in the agency space in the next couple of years.

Have you registered with us yet?

Register now to enjoy more articles and free email bulletins

Register
Already registered?
Sign in

Would you like to post a comment?

Please Sign in or register.