On Sunday, New York-based Omnicom Group and Paris-based Publicis—announced a merger that would create the largest advertising and marketing services holding company in the world, with a market capitalization of $35.1 billion, combined annual revenues of US$22.7 billion, and more than 130,000 employees worldwide.
The new company, reportedly born from a bromance in Davos, will be called Publicis Omnicom Group and brings together some of the biggest ad agency, PR and marketing services names like BBDO, DDB, TBWA, Leo Burnett and Saatchi & Saatchi all under one roof. All of these have Canadian offices, as well as other Publicis-Omnicom holdings like Fleishman-Hillard and Ketchum public relations.
Brian Wieser, senior research analyst at Pivotal Research Group wrote on Saturday, “While most industry participants and observers alike would have viewed such a combination as highly unlikely only 48 hours ago, the implications of such news can now be more fully considered, and it is profound.”
According to AdAge, the two companies hope to realize more than US$500 million a year in operating synergies like consolidation of real estate, companies and possible employee redundancies. But as Rupal Parekh points out, whatever they’re hoping to save, more important is how the new behemoth manages potential client conflicts that will occur thanks to this unprecedented combination of agencies. How will huge clients like Pepsi and Coke, as well as telecom giants Verizon, AT&T, Sprint and T-Mobile, react to suddenly being under the same agency umbrella?
MDC Partners CEO Miles Nadal told Marketing mag that it presents an “incredible opportunity” for smaller holding company’s like MDC, which owns Anomaly, 72andSunny, Kirshenbaum Bond Senecal + Partners, and Crispin Porter + Bogusky. “Rarely in the history of our industry has consolidation led to more innovative work and better work that drove better performance,” he said. “Clients will move towards more stable organizations that are smaller, more nimble and really have a dedicated mission to do brilliant work.”
However, Wieser wrote in a note that this move may inspire further consolidation and has raised his year-end price target on Interpublic to US$21 from US$16 previously, saying the holding company will immediately be considered to be in play by investors.
Look for plenty of pontificating on this deal’s effect in the coming weeks and months as more implications emerge, but the deal isn’t expected to be finalized until late this year or early next. And while the effect on the industry may be profound, it will be well after that until its full scope becomes clear.