Yesterday, Paris-based ad company Publicis and New York-based ad company Omnicom announced plans to merge, creating what will be the world’s largest advertising group. Publicis chief executive Maurice Levy claimed, “This is a new company for a new world.”
Levy went on to say that the newly merged Publicis Omnicom, “…will be able to face the exponential development of new Internet giants like Facebook and Google, changing consumer behavior, the explosion of big data, as well as handle the blurring roles of all the players in the market.”
In an interview on AllThingsD.com, Simulmedia’s Dave Morgan told Peter Kafka that he believes the deal has more to do with “better margins and happier investors” than trying to compete with the tech giants of the world. “I believe that consolidation is an inevitability of the holding company business/capital structure,” said Morgan, “The bigger they are the more they can reduce costs/redundancies and hold profit margins and manage debt cheaper.”
While the companies still must receive antitrust clearance from authorities for the merger to be complete, Omnicom CEO John Wren commented they are not expecting anything that would prevent the merger from going forward. The combined company will bring a number of well known advertising brands under one roof, including Saatchi & Saatchi and Leo Burnett of Publicis and Omnicom’s BBDO, TBWA and DDB.
Once the merger is complete, Publicis Omnicom will have combined sales of nearly $23 billion and 130,000 employees. According to the announcement, shareholders in Publicis and Omnicom will hold approximately 50 percent of the merged company’s equity.
During the first 30 months after the merger is complete, Wren and Levy plan to lead the company jointly, after which Levy will transition into a non-executive chairman position while Wren will remain the CEO.
With a combined stock market value of more than $30 billion, the new Publicis Omnicom will supersede WPP of London as the industry’s leading advertising company. WPP chief executive Martin Sorrell released a statement on the merger, saying, “It’s an extremely bold, brave and surprising move.”
(Image Credit: AP.org)