Publicis and Omnicom to merge and create ad colossus

Move over Martin Sorrell, there’s a new marketing behemoth in town. A merger between France’s Publicis and US conglomerate Omnicom worth $35.1bn is set to create the world’s biggest advertising company, knocking Sorrell's WPP off the top spot.

The two companies, formerly second and third biggest in the world, are hoping to use their combined muscle to take on Google and Facebook’s domination of digital advertising.

The merger creates something of a powerhouse: Publicis and Omnicom have combined 2012 revenues of $22.7bn and a total staff of 130,000. It will be seen as a defensive move in reaction to the shift in power from traditional advertising agencies to the digital titans over in Silicon Valley.

‘The communication and marketing landscape has undergone dramatic changes in recent years including the exponential development of new media giants and the explosion of big data, blurring the roles of all players,’ said Maurice Levy, chief executive of Publicis.

‘John and I have conceived this merger to benefit our clients by bringing together the most comprehensive offering of analogue and digital services.’

The move is also being seen as a cost-cutting exercise, with estimated savings of $500m from the merger.

The move is expected to put WPP under pressure to act, having dominated as the world’s largest advertising agency for the past four years. But the market has acted in its favour this morning with shares in WPP rising 2.1% - perhaps a signal of the confusion and doubt the merger is causing

Sir Martin Sorrell is famed for growing Saatchi & Saatchi through mergers when he was CFO, and continuing his appetite for acquisitions when he created WPP. But the WPP boss was still surprised by his competitors’ move.
 
‘A very big, bold, brave and surprising move,’ he said this morning.

‘It is puzzling strategically because it’s not in line with Publicis’ strategy as it doesn’t increase their fast growing markets or their digital penetration and Omnicom has always said it didn’t want to get involved in the scrum for digital.
 
‘Why Omnicom shareholders should approve a nil-premium merger I really don’t know. Omnicom are significantly better and all they end up with is 50% of the company.’
 
Sorrell denied WPP would be pursuing a similar partnership and accused Levy and John Wren, Omnicom's chief executive, of not communicating with their clients.
 
‘American media owners and clients are going to be concerned this was rushed out over the weekend and they failed to really engage with their clients and explain,’ he said.
 
If the merger goes ahead, the new company will be imaginatively named 'Publicis Omnicom Group' and will have dual headquarters and listings in Paris and New York but will be registered in the Netherlands. Sorrell and other commentators have expressed doubts over whether the deal will go through as it could face opposition from American regulators.
 
The plan is to have John Wren, the chief executive at Omnicom and Maurice Levy, the head of Publicis Group, run the company has co-chief execs for the first few years. Let’s see how well the pair can learn to share their toys…