Publicis-Omnicom merger could see client ‘shake out’

Sir Martin Sorrell's WPP poised to reap some benefits. Picture: Getty
Sir Martin Sorrell's WPP poised to reap some benefits. Picture: Getty
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The $35 billion (£23bn) mega-merger of advertising agency giants Publicis and Omnicom risks handing benefits to the enlarged company’s biggest rival, WPP, analysts have claimed.

The “merger of equals”, which was announced at the weekend, is set to make the Publicis Omincom Group (POG) bigger than No1 WPP in terms of market capitalisation and income. And while WPP chief executive Sir Martin Sorrell said the merger was “brave”, “bold” and “surprising”, concerns over competition issues and client shake out as a result of the tie-up have been raised.

Clients of the American Omnicom and French Publicis – No2 and No3 in the global market, respectively – will bring some of the biggest corporate rivals under one roof, including Coke and Pepsi, Burger King and McDonald’s, and Honda and Nissan. Although directors insisted the merged firm would maintain “very strict firewalls”, it is unusual for major clients such as these to share an agency. POG, whose merger is expected to be complete by the end of the year or early next, also faces a loss of talent.

Investec’s Steve Liechti said he expects “near-term trading upside for WPP from any client/ talent fall-out” for the deal. WPP’s shares closed up 7p at 1,182p. But Liechti added that the deal might force WPP to look for its own merger or acquisition opportunities to meet the massive shifts in requirements from rapidly globalising media space sellers, particularly in the digital arena led by Facebook and Google.

Possible targets for Sorrell’s FTSE 100 agency include Interpublic Group, which owns PR firm Weber Shandwick and full-service agency McCann Erickson.

There was also consternation about the dual chief executive role proposed for the new company. Publicis chief executive Maurice Levy and his Ominicom counterpart, John Wren, plan to be co-chiefs for 30 months. Levy, 71, will then be made chairman of the group, while Wren, 60, takes over executive control.

Tod Sacerdoti, the chief executive of digital video advertising agency BrightRoll, said: “Companies run by two CEOs rarely thrive and the personalities here only exacerbate the problem.”