Omnicom and Interpublic will face plenty of hurdles in their efforts to secure the $30bn-plus mega merger but, according to industry experts, the deal is all about adland playing catch up as clients increasingly embrace new tech and data-driven marketing.
Reports about the deal first emerged over the weekend, amid claims that talks had started in the summer but that in effect it was, according to one insider, “a takeover of Interpublic by Omnicom even if portrayed as a merger — IPG has been keen to find a buyer for some time”.
IPG was worth $10.9bn at the end of trading on Friday while Omnicom was valued at $20.2bn. The combined group would have net revenue of more than $20bn. Both groups are headquartered in New York.
Even so, despite confirmation from both parties, it is far from a done deal. Omnicom was close to a similar merger a decade ago when it agreed to a $35bn deal with Publicis Groupe only for talks to collapse. There will also be regulatory hurdles to clear, given the overlap in media and creative agencies.
But many see the takeover as just another symptom of adland’s failure to embrace the data-driven future, with budgets now being siphoned off by large tech companies such as Google and Amazon that offer advertising tools as well as the marketplace to buy and sell digital ads.
Then there is the issue of artificial intelligence tools, which offer brand owners the chance to make their own ads, cheaper and faster and with greater targeting than ever before.
One insider said: “Big ad groups have been in denial for ages and have sat back as the tech companies have come in and pulled the rug from under them. This is all about data-driven marketing; for far too long all adland wanted to do was make nice ads, data was the grubby end. Now it drives the whole business and large agencies are playing catch-up. Will brand owners give a toss? Probably not. What most want is effective advertising, transparency, measurability, and flexibility and they will go wherever this is on offer.”
It has been argued that Publicis has fared better than most of the large holding companies, having invested early in data-led services, including through the acquisitions of digital groups Sapient in 2015 and Epsilon in 2019 to bolster its technology platforms.
Most of Omnicom’s data services are provided by its media agencies, while Interpublic has cited its purchase of Acxiom as a key driver of its data-driven operations.
Even so, Forrester VP and principal analyst Jay Pattisall is in little doubt what is driving the deal. He said: “The Omnicom IPG acquisition is about scale: scale of technology, data, media clout and the ability to produce content at the velocity and volume of media impressions.”
Pattisall added: “The aggregation of resources will accelerate Omnicom and the industries march to AI as a foundational element of marketing creation and production. The components are all there, Flywheel, Acxiom and the Omni marketing operating system.
“Principal media will continue to be commonplace and slightly grow with Mediabrands/Magna billings being able to take advantage of Omnicom principal media solutions.”
According to the official release, the two will have a combined 2023 revenue of $25.6bn, adjusted EBITA of $3.9bn, and free cash flow of $3.3bn. The combined company will retain the Omnicom name and trade under the OMC ticker symbol on the New York Stock Exchange.
John Wren will remain chairman and CEO of Omnicom. Phil Angelastro will remain EVP and CFO of Omnicom. Philippe Krakowsky and Daryl Simm will serve as co-presidents and COOs of Omnicom. Krakowsky will also be co-chair of the integration committee post-merger. Three current members of the Interpublic board of directors, including Philippe Krakowsky, will join the Omnicom board of directors.
Wren (pictured, left) said: “This strategic acquisition creates significant value for both sets of shareholders by combining world-class, highly complementary data and technology platforms enabling new offerings to better serve our clients and drive growth,” said John , chairman and CEO of Omnicom.
“Through this combination, we are poised to accelerate innovation and harness the significant opportunities created by new technologies in this era of exponential change. Now is the perfect time to bring together our technologies, capabilities, talent and geographic footprints to bring clients superior, data-driven outcomes. We are excited to welcome Philippe and the entire Interpublic team to the Omnicom family.”
Krakowsky (pictured, right) added: “Our two companies have highly complementary offerings, geographic presence and cultures. We also share a foundational belief in the power of ideas, enabled by technology and data. By joining Omnicom, we are creating a uniquely comprehensive portfolio of services that will make us the most powerful marketing and sales partner in a world that’s changing at speed. We look forward to working with John and the entire Omnicom team.”
However, while the proposed deal will make Omnicom the largest holding company, it seems there will be plenty of blood letting. With a projected $750m in annual cost savings, aside from those listed above, there will be many executives left wondering what the future holds for them…
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