The “Big Four” Global Advertising Holdings (WPP, Publicis, Omnicom and IPG) are turning into the “Big Three”. Publicis Group and Omnicom have agreed to merge and the combined company is expected to be called Publicis Omnicom Groupe.
On Sunday, New York based-Omnicom Group and Paris-based Publicis Groupe announced they would combine in a “merger of equals” that has a market cap of $35 billion. The company will be called Publicis Omnicom Group and be led by Omnicom CEO John Wren and Publicis CEO Maurice Levy. They will be co-chief executives. The merger brings together well-known ad firms such as Omnicom’s BBDO Worldwide, TBWA Worldwide and DDB Worldwide with Publicis’ Saatchi & Saatchi and Leo Burnett. The new company will have more than 130,000 employees. The deal could close as soon as the fourth quarter, Publicis and Omnicom said in a joint statement. The combined company is expected to be listed on the New York Stock Exchange and Euronext Paris under the symbol OMC. Revenue for both firms was $22.7 billion in 2012.
Publicis Omnicom Group have some of the world’s largest advertising clients including, Johnson & Johnson, Mars, McDonald’s, Pfizer, Procter & Gamble. Potential for conflicts could arise between the new holdings Advertising Agencies for clients including Pepsi and Coca-Cola, AT&T, Sprint, T-Mobile and Verizon.
“For many years, we have had great respect for one another as well as for the companies we each lead,” said Messrs. Levy and Wren. “This respect has grown in the past few months as we have worked to make this combination a reality. We look forward to co-leading the combined company and are excited about what our people can achieve together for our clients and our shareholders.”
Growth Opportunities in Emerging Markets and Efficiency Gains
Advertising agencies are feeling the pinch in the US and Europe, where conditions are flat. Consolidation is being driven by growth opportunities in emerging markets such as Brazil, Russia, India and China and Latin America to offset weak growth elsewhere.
The merged holding is also aiming for US$500 million in savings due to efficiency gains. To achieve this savings the companies are likely going to require consolidation of real estate, companies and possible headcount elimination. In their Sunday conference call the Publicis and Omnicom Group CEO’s declined to explain how those cost-savings will be achieved.
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