Credit: Maximilian via Unsplash
The $US13 billion pitch came off, after talks lasting almost a year, with Omnicom to absorb Interpublic Group (IPG) to create the world's biggest advertising player.
The marriage of rivals brings together the world’s third biggest advertising group, Omnicom, with the fourth, IPG, to form a company with 100,000 people and revenue of $25.6 billion (net revenue of $20 billion), with 57% of that in the US.
Clients include Amazon, Unilever and AT&T.
WPP, the current biggest holding group by revenue (about $18.97 billion), and Publicis Groupe, the biggest by market capitalisation, will find themselves in the shade up against a player with bigger assets to deploy.
However, there will be some fallout. The deal aims for $US750 million of annual “synergies”. While this traditionally means more value when combined, it usually comes with job losses as duplicated functions feel the fiscal knife.
Analysts said efficiencies could be realised in real estate costs, back-office costs, leadership team costs and across the business.
However, the upside is more scale and being in a better position to invest in people, partnerships and technology.
The deal -- bringing together brands such as BBDO, TBWA, McCann, Weber Shandwick and Mediabrands -- is pitched to be accretive to both sets of shareholders, adding to earnings per share.
And would “bring together the industry’s deepest bench of marketing talent, and the broadest and most innovative services and products, driven by the most advanced sales and marketing platform.
“Together, the companies will expand their capacity to create comprehensive full-funnel solutions that deliver better outcomes for the world’s most sophisticated clients.”
The big question is agency brands. How many would there be under a combined entity?
A big winner is John Wren, the quiet CEO of Omnicom who now gets to run the combined business. IPG’s Philippe Krakowsky will be co-president and COO alongside Daryl Simm.
Martin Sorrell, founder of WPP and of pure-play digital advertising group S4 Capital, called the deal “a circling of wagons; two people huddling in the cold,” according to the Financial Times.
Sir Martin sees the transaction as a reflection of the pressure on agency fees, people and margins, together with the spectre of the impact of artificial intelligence and increased programmatic media planning and buying.
Omnicom will keep its listing on the New York Stock Exchange.
“This strategic acquisition creates significant value for both sets of shareholders by combining world-class, highly complementary data and technology platforms enabling new offerings to better serve our clients and drive growth,” said Wren.
“Through this combination, we are poised to accelerate innovation and harness the significant opportunities created by new technologies in this era of exponential change.
“Now is the perfect time to bring together our technologies, capabilities, talent and geographic footprints to bring clients superior, data-driven outcomes.”
The $13.25 billion all share transaction will see Omnicom shareholders owning 60.6% of the combined company and Interpublic 39.4%.
“This combination represents a tremendous strategic opportunity for our stakeholders, amplifying our investments in platform capabilities and talent as part of a more expansive network,” said Philippe Krakowsky, Interpublic’s CEO.
“Our two companies have highly complementary offerings, geographic presence and cultures. We also share a foundational belief in the power of ideas, enabled by technology and data.
“By joining Omnicom, we are creating a uniquely comprehensive portfolio of services that will make us the most powerful marketing and sales partner in a world that’s changing at speed. We look forward to working with John and the entire Omnicom team.”
Deal highlights, according to Omnicom:
- Highly complementary assets create an unmatched portfolio of services and products that expands client opportunities for each company on day one
- Omnicom and Interpublic share highly complementary cultures and core values including a foundational belief in the power of ideas enabled by technology and data
- Creates an industry leading identity solution with the most comprehensive understanding of consumer behaviors and transactions, enabling us to deliver superior outcomes for our clients at scale and speed
- Advances ability to continually innovate and develop new products and services, providing higher ROI on marketing spend
- Significant free cash flow provides greater capacity for internal investments and acquisitions
A slide from the investor presentation:
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