Clash of the Mad Men in $35bn advertising mega-merger
Tuesday 30 July 2013
Sir Martin, the chief executive of WPP, which will lose its crown as the world’s biggest advertising group as a result of the Publicis-Omnicom merger, said: “This is a seismic shock to the industry and will make clients and people think about what they’re doing. This gives us a big opportunity.”
Publicis, the owner of agencies Saatchi & Saatchi and Starcom Media Vest, and Omnicom, which owns Abbott Mead Vickers and Adam & Eve DDB, want to merge to get greater scale when they negotiate with media owners.
Messrs Levy and Wren claimed they would save €500m (£430m) by uniting the companies, which will employ 130,000 worldwide, creating the world’s biggest advertising group by revenue.
Analysts at Berenberg and Citigroup suggested the savings targets were “optimistic” and regulators will need to approve the deal. Publicis has a 21.1 per cent share of the global media-buying market and Omnicom has 14.5 per cent. The combined 35.6 per cent moves them above WPP on 28.1 per cent, according to analysts at Recma.
In the Americas, Publicis Omnicom will have a 41.6 per cent share, although WPP will remain dominant in Europe, including the UK. The broker Liberum Capital reckoned Publicis and Omnicom would suffer “some likely client losses” as the two companies work for rival clients such as Coca-Cola and Pepsi.
Mr Wren admitted conflicts between clients could be a challenge. “Do I expect to have difficulties? Yes. Do I expect to have resolutions? Absolutely,” he said.
Rival ad agencies were quick to suggest they would benefit at the expense of Publicis and Omnicom, especially as the merger could take six months and clients do not always regard bigger as better when it comes to producing strong creative work. “More agile groups can only gain,” Don Elgie, the chief executive of the London-listed marketing group Creston, said.
WPP’s Sir Martin pointed out that some analysts were likening the Publicis Omnicom tie-up to the ill-fated merger of Saatchi & Saatchi and Bates in 1987. “It was driven by the egos, the turf, the territory and the money rather than industrial logic,” he said.
Both Publicis and Omnicom have faced speculation about succession planning as their chief executives are veterans who earn huge pay packages and have been reluctant to retire.
By merging the companies, Messrs Levy and Wren get to stay in charge for a further 30 months, when the Frenchman will become non-executive chairman and the American will be sole chief executive.
Contrasting styles: Men behind the merger
The 71-year-old is suave and charming but no one stays at the top for 25 years without being ruthless, with more than a touch of ego. Last year, he jousted with the French president François Hollande, who criticised Mr Levy’s €16.2m (£14m) bonus.
Some say the Publicis boss is the real winner in this “merger of equals” as the group has only $8.8bn (£5.7bn) in revenues compared with Omnicom’s $14.2bn. Mr Levy, who has been with Publicis for more than 40 years, has failed to groom a successor but admirers say he has been quick to embrace digital and emerging markets for clients such as Nestlé and Procter & Gamble.
Now he stays as co-chief executive for two and a half years, before becoming non-executive chairman — which would be frowned upon under UK corporate governance guidelines.
Mr Wren, 60, keeps a low profile, eschewing the chance to hold forth publicly each year at the showpiece Cannes Lions advertising festival — unlike Maurice Levy and WPP’s Sir Martin Sorrell. He has been at the helm since 1997 and, like others, has not solved the succession question, which is why this merger might appeal.
Mr Wren stays as co-chief executive and then takes sole charge after two and a half years. He earned $14.8m last year. Creative types are full of praise for Mr Wren as he leaves his agency bosses to get on with looking after clients such as BT and Volvo. However, critics claim the US giant is too federated and has fallen behind in digital and emerging markets. WPP snatched Omnicom’s title as the world’s biggest ad group in 2008. Said to be a tough operator despite his hands-off style.
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