WHEN New York’s Omnicon and Paris-based Publicis ran their $35 billion (£23bn) adland merger up the flagpole I admit I was blind-sided that WPP’s Sir Martin Sorrell would be one of the first to salute it.
To the British advertising giant’s boss, the game-changing move by two of his biggest rival companies is “extremely bold, brave and surprising”.
A few thoughts. First, admiration at Sorrell’s language. As any fan of the TV comedy Yes, Minister knows, “bold” and “brave” can be euphemisms for “You must be crazy, this could backfire!”
Second, a marriage of Omnicon and Publicis, already behemoths in the advertising sector, will face strong anti-trust headwinds from scores of global regulators.
It is estimated that a new Publicis Omnicom entity would have 20 per cent of global media spending and nearer 40 per cent in the el dorado market of the United States.
There is, therefore, substantial doubt whether the mega-deal can get approval without the sort of weighty concessions or “remedies” to square the regulators that might make the merger less attractive.
And, given the size of Publicis Omnicon, there is likely to be no shortage of media companies that depend on advertising bending regulatory ears with arguments against the marriage.
Major corporate clients of both the French and US groups may also cut up rough about the loss of one of the big six independent worldwide advertising agencies.
Clients such as Omnicom’s PepsiCo, AT&T and Microsoft, and Publicis’s Coca-Cola, Verizon and Google are used to having negotiating muscle to wring better payment terms out of the big advertisers.
They may fear that Publicis brands such as Saatchi & Saatchi and Leo Burnett and Omnicom’s BBDO Worldwide and DDB Worldwide may co-operate unofficially on pricing. Clients may also cite confidentiality issues. Will arch-rivals such as Coca-Cola and PepsiCo really feel comfortable about being under the same advertising roof?
This brings us to the silver lining the wily old Sorrell may see in the deal that leads to WPP losing the number one slot in the industry in terms of profits and revenues.
Namely, dissatisfaction among Publicis Omnicom clients at the Madison Avenue/Champs Elysees marriage prompting them to seek a different big advertising player to satisfy their needs. There will be many phone calls, texts, e-mails, business pitching and lunching going on in adland in the coming months as feelers are put out for new business.
Sorrell also reckons yesterday’s move is bound to prompt further takeover action in the sector, and he probably sees WPP as being a participant. WPP’s shares were up 2 per cent at one stage yesterday, showing that the market did not regard events as totally not in its interest.
Barclays fund-raising tops results statement
It’s clear that Barclays’ interim financial results this morning are now largely irrelevant in the City’s eyes. The only game in town is whether it will confirm that it wants a £4-5 billion rights issue to repair a hole in the balance sheet.
The bank is certainly indicating that this is likely to be the case. It will, of course, be portrayed as prudent management of capital, not being wrongfooted by the “Taleban” capital regulators.