‘No major problems’ in £23bn merger of advertising giants

THE chief executives of Publicis and Omnicom have said that they had spoken to their major clients about their planned £23bn mega-merger and did not anticipate major problems with big advertisers defecting to rivals in the transition period.
By The Newsroom
Published 30th Jul 2013, 12:01 BST

Publicis CEO Maurice Levy said the reaction to the merger from all the company’s major clients had been “extremely positive”. But shares in advertising giant WPP were buoyed yesterday amid hopes that it will reap some benefit from the merger between two of its major rivals to create the biggest player in the sector.

Competing sector executives and analysts expect that the Publicis Omnicom merger could spur some big customers to switch agencies to avoid conflicts. Holding companies such as Omnicom and Publicis own networks of agencies and PR firms within the larger group. They are designed to work independently so that competing clients – Pepsi and Coca-Cola for example – are placed in separate networks to avoid conflict. “We’re going to work extremely hard to resolve any client conflict issues with creative solutions,” said John Wren, the Omnicom CEO.

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Sir Martin Sorrell’s UK-based WPP will be dwarfed by the deal between New York’s Omnicon and Paris’s Publicis, which in Britain will bring together the likes of Saatchi & Saatchi and BBDO – though the new adland giant is likely to face regulatory hurdles.

Shares in WPP gained two per cent on the FTSE 100 Index on expectations that it would gain from the move, while brokers UBS upgraded the stock to a ‘buy’ rating. Investec analyst Steve Liechti said that in the short term the company looked likely to gain from client accounts and personnel leaving the newly-formed giant. However in the medium term it may see its global presence challenged over the dominance of its large rival and find itself bounced into an expensive acquisition, he added.

Sir Martin’s comment that “further consolidation is now inevitable” reported in the Daily Telegraph, has fuelled speculation that WPP could move for US-based Interpublic, Havas in France or Japan’s Dentsu.

Berenberg analyst Sarah Simon said: “Overall, it will be some months before we see the true impact on WPP. “In the near term, it could benefit from upheaval within two of its major rivals; in the longer term, however, it may see increased pressure as it loses the kingpin spot in media buying and technology investment.”