failed-merger

Failed Publicis-Omnicom Merger Leaves Nobody Mourning

  |  May 12, 2014   |  Comments

The proposed $35 billion merger between Publicis and Omnicom fell through last week, but industry participants believe it is still business as usual.

Puns and snotty references to "too big to fail" come all too easily to mind, as two ginormous advertising holding companies failed to merge into one totipotent advertising holding company last week. But some never thought it would happen, and few competitors seemed to be alarmed. Following Friday's announcement that the proposed $35 billion merger between Publicis and Omnicom had been called off, most in the industry expect business as usual.

Tussles about C-level executives and taxes aside, Christian Hughes, president and principal of Cutwater, thinks there were two issues that doomed this merger to failure: size and culture.

Hughes says, "I think the reason this failed ultimately came down to a culture clash of two big and successful and independent companies, two big and successful leaders, and a French company versus an American company...If one of the things that binds a company together is its culture, then the bigger you get, the harder it is to maintain that culture."

Winners

The big winners of all of this are likely to be the independent agencies, according to Keith Hunt, managing partner at Results International, a mergers and acquisitions advisory firm focused on marketing communications and advertising technology. They were the ones most at risk from the massive firepower created via this mega-merger, Hunt says, and will be feeling far safer now that it has gone away. "The perfect storm of disillusioned staff and disillusioned clients potentially falling out of Publicis and Omnicom makes this a good time for independents."

WPP, too, will retain the bragging rights to the title of world's largest advertising company and its chief executive (CEO) Martin Sorrell may go on the prowl, according to Hunt. "After all, Sorrell didn’t change his strategy when this mega-merger was announced last summer so he is unlikely to change anything now, other than possibly going after staff and clients from both networks," Hunt comments.

Losers

But clients and staff alike may be feeling queasy at the sudden stop. Having been told to expect a brave new world nine months ago, some clients are likely to be feeling pretty unsettled on the heels of this news. "While most of the relationships will be sound, if there are any that are a little wobbly then this news might be the straw that breaks the camel’s back," Hunt comments. The same goes for staff at both agencies, he adds. The heads of the network agencies will have a big job to settle down nervous staff.

Now?

The failure to merge is not expected to have any immediate impact on the digital marketing business. Both companies maintain their current balance in the holding company universe, and the industry should expect each to continue to follow their respective strategies.

Martin Cass, CEO of Assembly, says the industry’s future will rely on the ability to deliver innovation. Bringing together two agency models from decades ago does not put innovation at the heart of the business, he notes. "It puts people at the heart of the business. This deal was about combining legacy of individuals and not the future.”

As far as Adam Graves, executive vice president at ad agency Threshold Interactive is concerned the message is a blunter one: "Like any great ad campaign, there has to be a big idea. And in a merger of this size that big idea has to align with the needs of the industry overall, or at least the companies involved. The only big idea here seemed to be making a couple of rich executives even richer."

The entire Publicis-Omnicom merger story does seem to leave a lot of questions unanswered but one thing that's for sure is that nobody seems to be mourning the failure of this deal. "I don't think anybody really understood it," Cutwater's Hughes concludes.

Image via Shutterstock.

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ABOUT THE AUTHOR

Susan Kuchinskas

Susan Kuchinskas has covered interactive advertising since its invention. The former staff writer for Adweek, Business 2.0, and M-Business covers technology, business and culture from Berkeley, CA.

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