Proposed merger of Publicis and Omnicom

Last updated

Proposed merger of Publicis and Omnicom
InitiatedJuly 28, 2013
StatusCalled off May 9, 2014

The proposed merger of Publicis and Omnicom was a proposed advertising industry merger between Publicis and Omnicom, announced on July 28, 2013. The resulting company would have been called Publicis Omnicom Group, and would have been the world's biggest advertising group with market capitalisation of $35.1 billion, pro-forma revenue of $22.7 billion, and more than 130,000 employees across the world. [1] [2] After the merger, Publicis Omnicom and WPP would have been the largest advertising groups in the world., [3] followed at a distance by Dentsu and Interpublic Group of Companies. The Publicis and Omnicom chief executives heralded the proposed operation as a "merger of equals" saying that Publicis and Omnicom shareholders will each hold about 50 percent of the new group's equity. The group would have had head offices in Paris and New York. [1]

Contents

The deal was called off in mutual agreement by both sides on 9 May 2014 after a relationship breakdown in proposal.

Merger

Rationale

The unexpected merger was proposed by Maurice Lévy, CEO of Publicis. [4] The mega-merger would put together Publicis with Omnicom, respectively with $8.8 and $14.2 billion in revenues in 2012, and a market capitalisation of $14.6 billion and $16.7 billion at the announcement. This compares with WPP, who recorded $15.6 billion in 2012 revenues and had market capitalisation of around $20 billion. [5] On a pro-forma basis, the merged entity would become the biggest advertising group on the market, and would have around $5 billion more revenue than the current market leader. [6] The merger would have consolidated the sector, as it would pull the two largest, Publicis Omnicom and WPP, significantly ahead of the next largest – Interpublic Group, Dentsu and Havas. [3] In a reference to the increasingly powerful new media giants Google and Facebook, Lévy noted the merger was a response to the sea-change in the communication and marketing landscape and the blurring the roles of all players, to the benefit of clients. [1] [3] Publicis stated that $500 million in synergies would be generated. [6]

Although Omnicom generated more top-line revenues than Publicis, its profit margin was only 15% compared to 18% achieved by Publicis. Thus Lévy was able to leverage this and obtain half of the new company for Publicis shareholders in an "equal" merger". Sir Martin Sorrell, head of WPP, praised the "extremely bold and brave and surprising move", but expressed reservations about the different cultures to be merged. [3]

Organization

The proposed company would be listed on both the Euronext Paris and New York Stock Exchange, corresponding to the previous headquarters of Publicis and Omnicom respectively, [2] [6] and the OMC ticker on the NYSE retained. [4] However, Lévy stated that for reasons of neutrality (and not tax), the new holding was to be registered in the Netherlands. [3] The merger, which received unanimous approval of both boards, would close in late 2013 or early 2014. The 71-year-old Maurice Lévy would jointly head the group with Ominicom's John Wren during the initial integration and development period lasting 30 months, after which Levy would become non-executive chairman and Wren sole CEO. [1] The board would have equal representation from Publicis and Omnicom, its 16 directors include both Lévy and Wren. [4]

Ownership

The Publicis and Omnicom chief executives heralded the proposed operation as a "merger of equals" saying that Publicis and Omnicom shareholders would collectively each hold about 50 percent of the new group's equity. [1] Trade press reported the unwillingness of Élisabeth Badinter, daughter of Publicis' founder Marcel Bleustein-Blanchet and chairman of the supervisory board of Publicis, to exit – she apparently refused to be bought out by a banking syndicate. However, as the largest shareholder of Publicis, she was expected to have her 9.13 percent holding of the company diluted by half as a result of the merger. [5] [Notes 1] Omnicom CEO John Wren was reported as holding 1.1 million Omnicom shares, and a considerable number of stock options that a change of control would crystallise. [5]

Concerns

The deal was subject to regulatory approval, although the French government had indicated its support, according to Lévy. [1] [7] As the deal would bring together worldwide networks like BBDO, TBWA and DDB from Omnicom as well as Leo Burnett, Publicis, and Saatchi & Saatchi under a single holding company, there was potential for client conflict. AdWeek noted that PepsiCo is handled by Omnicom's TBWA\Chiat\Day and the Coca-Cola account resides at Publicis' Leo Burnett. Similarly, AT&T was with Omnicom and Verizon with Publicis. [5]

Some commentators expressed concern, with Craig Le Grice of The Drum saying that it would be "creating a sector essentially owned by two holding companies", [8] but not all industry observers were equally worried. [1] Wren believed that the merger would "create value and new opportunities". [4]

Cancellation of merger

The expected completion of the merger in late 2013 failed to materialise, and created great uncertainty for the industry players. [9] In May 2014, it was announced that the merger would no longer go ahead due to the magnitude of challenges yet remaining. [10] The announcement was made in a statement released jointly from the two chief executives of Publicis and Omnicom. [10] Reuters reported that the two holding companies' agencies had been losing billions in business pitches due to the uncertainty, and that business worth $1.5 billion had been lost just in the last month prior to the decision to cancel, and that WPP agencies had aggressively cut fees to gain new business from their rivals, but this was denied by Omnicom [11]

From the start, huge difficulties were foreseen for a merger of this magnitude, most importantly different corporate cultures and management philosophies. [12] There were known to have been significant tax issues. [11] While Wren was keen to emphasise in explaining the collapse that "there was no one factor" at play responsible, Lévy indicated the deal-breaker was Omnicom's insistence on keeping all three top posts for its own executives. Lévy said: "it is not a merger of equals if you have a CEO, CFO and general counsel only from one side". [13] [14] While Omnicom has a more devolved organisation and lower margins than its counterpart, it is known that Publicis enjoys higher net margins and does so through greater centralisations; the CFO position would have been a key determinant in the merged organisation. [11]

Notes

  1. ↑ Badinter is the largest shareholder of Publicis, with 9.13% of the equity and 16.57% of voting rights. [5]

Related Research Articles

<span class="mw-page-title-main">Sky Group</span> British media and telecommunications conglomerate

Sky Group Limited is a British media and telecommunications conglomerate, which is a subsidiary of the American conglomerate Comcast, and headquartered in Isleworth. It has operations in the United Kingdom, Ireland, Germany, Austria, Switzerland and Italy. Sky is Europe's largest media company and pay-TV broadcaster by revenue, with 23 million subscribers and more than 31,000 employees as of 2019. The company is primarily involved in satellite television, producing and broadcasting. The current CEO is Dana Strong.

Tribune Media Company, also known as Tribune Company, was an American multimedia conglomerate headquartered in Chicago, Illinois.

An advertising agency, often referred to as a creative agency or an ad agency, is a business dedicated to creating, planning, and handling advertising and sometimes other forms of promotion and marketing for its clients. An ad agency is generally independent of the client; it may be an internal department or agency that provides an outside point of view to the effort of selling the client's products or services, or an outside firm. An agency can also handle overall marketing and branding strategies promotions for its clients, which may include sales as well.

<span class="mw-page-title-main">FTSE 100 Index</span> British stock market index

The Financial Times Stock Exchange 100 Index, also called the FTSE 100 Index, FTSE 100, FTSE, or, informally, the "Footsie", is the United Kingdom's best-known stock market index of the 100 most highly capitalised blue chips listed on the London Stock Exchange.

<span class="mw-page-title-main">Publicis Sapient</span> Digital transformation consulting company

Publicis Sapient is a digital consulting company belonging to Publicis Groupe, with 20,000 people and over 50 offices worldwide. It was originally established as Sapient in Cambridge, Massachusetts in 1990. In 2015, Sapient became an independent subsidiary of French multinational advertising firm Publicis, following a deal worth US$3.7 billion. It remains headquartered in Boston, Massachusetts, and as of February 2015, the leadership is retained.

Omnicom Group Inc. is an American global media, marketing and corporate communications holding company, headquartered in New York City.

WPP plc is a British multinational communications, advertising, public relations, technology, and commerce holding company headquartered in London, England. It is the world's largest advertising company, as of 2023. WPP plc owns many companies, which include advertising, public relations, media, and market research networks such as AKQA, BCW, CMI Media Group, Essence Global, Finsbury, Grey, Hill & Knowlton, Mindshare, Ogilvy, Wavemaker, and VML. It is one of the "Big Four" agency companies, alongside Publicis, The Interpublic Group of Companies, and Omnicom Group. WPP has a primary listing on the London Stock Exchange, and is a constituent of the FTSE 100 Index.

<span class="mw-page-title-main">Eurobank Ergasias</span> Third largest bank in Greece

Eurobank is a financial organisation that operates in Greece, Cyprus, Luxembourg, Bulgaria and the UK. As of December 2018, the Eurobank Group counts, €58 billion in assets, 653 customer service locations in Greece and abroad, and 13,162 employees.

Razorfish is an interactive agency part of Publicis Groupe. Razorfish provides services, such as, web development, media planning and buying, technology and innovation, emerging media, analytics, mobile, advertising, creative, social influence marketing and search.

<span class="mw-page-title-main">Havas Creative</span>

Havas Creative, formerly known as Havas Worldwide and Euro RSCG, is a French advertising agency. It is one of the largest integrated marketing communications agencies in the world, made up of 316 offices located in 75 countries. The firm provides advertising, marketing, and corporate communications services.

<span class="mw-page-title-main">Deutsche Börse</span> Financial services company of Germany

Deutsche Börse AG, or the Deutsche Börse Group, is a German multinational corporation that offers a marketplace for organizing the trading of shares and other securities. It is also a transaction services provider, giving companies and investors access to global capital markets. It is a joint stock company and was founded in 1992, with headquarters in Frankfurt. On 1 October 2014, Deutsche Börse AG became the 14th announced member of the United Nations Sustainable Stock Exchanges initiative.

<span class="mw-page-title-main">TBWA Worldwide</span> American international advertising agency

TBWA Worldwide is an international advertising agency whose main headquarters are in Midtown Manhattan, New York City, United States.

<span class="mw-page-title-main">Publicis</span> French multinational advertising and public relations company

Publicis Groupe is a French multinational advertising and public relations company. One of the oldest and largest marketing and communications companies in the world, it is headquartered in Paris.

<span class="mw-page-title-main">The Interpublic Group of Companies</span> American advertising company

The Interpublic Group of Companies, Inc. (IPG) is an American publicly traded advertising company. The company consists of five major networks: FCB, IPG Mediabrands, McCann Worldgroup, MullenLowe Group and Marketing Specialists, as well as several independent specialty agencies in the areas of public relations, sports marketing, talent representation and healthcare. It is one of the "Big Four" agency companies, alongside WPP, Publicis, and Omnicom. Phillippe Krakowsky became the company's CEO on January 1, 2021.

Media buying refers to the procurement of advertising on mediums such as a television, newspapers, commercial radio, magazines, websites, mobile apps, over-the-top media services, out-of-home advertising etc. It also includes price negotiation and the appropriate placement of ads based on research to reach the right audiences considering the product, service and message being advertised. A media buyer is tasked to perform such activities.

<span class="mw-page-title-main">Tax inversion</span> Corporate relocation to a lower tax location

A tax inversion or corporate tax inversion is a form of tax avoidance where a corporation restructures so that the current parent is replaced by a foreign parent, and the original parent company becomes a subsidiary of the foreign parent, thus moving its tax residence to the foreign country. Executives and operational headquarters can stay in the original country. The US definition requires that the original shareholders remain a majority control of the post-inverted company. In US federal legislation a company which has been restructured in this manner is referred to as an "inverted domestic corporation", and the term "corporate expatriate" is also used.

<span class="mw-page-title-main">OMD Worldwide</span> American media communications agency (1996–)

OMD Worldwide is a media communications agency. It is a subsidiary of Omnicom Group and an Omnicom Media Group agency considered the holding company's "media specialist brand". Omnicom Media Group is the media services division of Omnicom Group. OMD is headquartered in New York City and its chief executive officer is George Manas.

<span class="mw-page-title-main">Matomy Media</span> Publicly traded company

Matomy Media Group Ltd., a publicly traded company since July 2014, is a shell corporation which was the former owner and operator of a number of performance-based and programmatic advertising solutions, which were all sold or closed by the end of 2019.

The advertising industry is the global industry of public relations and marketing companies, media services, and advertising agencies. Several large advertising agencies, including WPP plc, Omnicom, Publicis Groupe, Interpublic and Dentsu, are among the industry's largest. It is a global, multibillion-dollar business that connects manufacturers and consumers. The industry ranges from nonprofit organizations to Fortune 500 companies.

The Big Six is the name colloquially given to the six largest advertising and public relations agencies in the world by revenue: Publicis, WPP, Omnicom, IPG, Dentsu, and Havas.

References

  1. 1 2 3 4 5 6 7 Channick, Robert (28 July 2013). "Leo Burnett parent in huge ad merger deal". Chicago Tribune. Retrieved 28 July 2013.
  2. 1 2 "Merger of Publicis and Omnicom makes biggest ad firm". BBC. 28 July 2013. Retrieved 28 July 2013.
  3. 1 2 3 4 5 Garside, Juliette (28 July 2013). "Omnicom and Publicis merger creates communications giant". The Guardian . Retrieved 28 July 2013.
  4. 1 2 3 4 "Omnicom And Publicis Announce Completely Unexpected Merger". Business Insider. 28 July 2013. Retrieved 28 July 2013.
  5. 1 2 3 4 5 "Publicis-Omnicom Merger Set". AdWeek, 26 July 2013
  6. 1 2 3 "Publicis and Omnicom announce merger of equals". Financial Times . 28 July 2013. Retrieved 28 July 2013.
  7. ↑ "UPDATE 1-Ad firms Publicis, Omnicom in merger talks – report". Reuters . 26 July 2013. Retrieved 28 July 2013.
  8. ↑ "Why Industry should be concerned by Publicis Omnicom Group formation". The Drum. 28 July 2013. Retrieved 28 July 2013.
  9. ↑ "Omnicom, Publicis Call Off Merger". The Wall Street Journal. May 2014.
  10. 1 2 "Publicis-Omnicom $35bn merger deal called off". BBC News. 9 May 2014. Retrieved 9 May 2014.
  11. 1 2 3 Abboud, Leila & Kim, Soyoung (9 May 2014). "Battle for control destroyed $35 billion Omnicom-Publicis merger". Reuters. Archived from the original on 17 August 2016. Retrieved 9 May 2014.
  12. ↑ Bender, Ruth (9 May 2014). "Sorrell Takes Pleasure From Publicis-Omnicom Deal Collapse". The Wall Street Journal.
  13. ↑ Bender, Ruth; Tadena, Nathalie; Vranica, Suzanne (9 May 2014). "Failed Merger Leaves Holes for Ad Giants". The Wall Street Journal.
  14. ↑ Reuters in London and New York. "Omnicom-Publicis merger collapses". The Guardian.{{cite web}}: |author= has generic name (help)
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.