Omnicom and Interpublic merger set to reshape global ad industry
Analysis
Omnicom Group and Interpublic Group are to merge in a deal that will reshape the advertising and media industry.
The news was confirmed on Monday. A statement said: “The combined company will bring together the industry’s deepest bench of marketing talent, and the broadest and most innovative services and products, driven by the most advanced sales and marketing platform.
“Together, the companies will expand their capacity to create comprehensive full-funnel solutions that deliver better outcomes for the world’s most sophisticated clients.”
Once completed, Omnicom shareholders will own 60.6% of the new company and Interpublic shareholders will own 39.4%. The deal is expected to generate annual cost synergies of $750m, according to the companies.
The new Omnicom will have 100,000 employees.
Leading a new ‘big five’
The Wall Street Journal reported at the weekend that Omnicom would acquire Interpublic in an all-stock deal that would value it between $13bn and $14bn.
With potential combined net revenue exceeding $20bn, the merger will create the world’s biggest advertising holding group, ahead of European competitors Publicis Groupe and WPP, shaking up the dynamics of the current agency landscape.
It would make the business more cost-efficient and maximise the opportunities offered by AI and data — the two areas where both groups have been investing in to stand out in an increasingly competitive market.
The objective will be to more strongly challenge the global tech giants, which have been taking more market share through their ad offerings along with more advanced use of AI and other tech developments.
Challenging tech players
Just last month, The Media Leader columnist Nick Manning, who sold his agency Manning Gottlieb Media to Omnicom in 1997, criticised agencies’ lack of innovation and quoted ad industry entrepreneur Bob Hoffman, who said: “Agencies have become little more than the sales department for Facebook, TikTok, Google and the rest of the adtech rat pack.”
Indeed, GroupM’s latest This Year Next Year global adspend forecast report, released on Monday, noted that digital spend, which has become increasingly dominant, is “consolidating around a few massive platforms”.
GroupM is now forecasting 41% of all global ad revenue to be earned by just Google, Meta and Amazon in 2025.
That said, the merger is likely to come under regulatory scrutiny, with the added uncertainty that a new US administration will be coming into power in January.
And with remits well beyond their home markets, European antitrust laws could also play their part in any merger.
Differing fortunes
The merged entity will count major advertisers including Apple, Volkswagen (both Omnicom), Johnson & Johnson and Nike (both Interpublic) among its media roster.
Interpublic is the smaller of the two companies and has underperformed its counterpart recently. In its Q3 financial results, it posted total revenue of $2.63bn and net revenue of $2.24bn, with flat organic growth.
Meanwhile, Omnicom posted revenue of $3.89bn in Q3 (the company does not disclose net revenue), with organic growth of 6.5%.
Interpublic notably lost Amazon’s $20bn global media account to Omnicom and WPP in September.
Under the merger, a number of well-known agency brands would also be impacted. Omnicom operates its media activity under Omnicom Media Group, with agencies including Hearts & Science and OMD. Interpublic, under IPG Mediabrands, has agencies including UM, Mediahub and Initiative.
Both holding groups also own a host of creative agencies, including BBDO and DDB (Omnicom), and McCann Worldgroup and MullenLowe (Interpublic).
Last week, Interpublic announced that it has sold experience design and tech agency Huge to private equity group AEA Investors. It is also planning to sell digital creative shop R/GA.
Matt Lacey, partner at Waypoint Partners, said: “Putting more and more separate branded businesses into big silos is not an option in a deal of this kind. Therefore, we are likely to see significant consolidation of agency brands over the next few years, akin to what WPP has been doing.”
He added: “We can expect the next few years for the new group to be characterised by consolidation and divestment.”
Changes ahead
It has been 10 years since the last major advertising holding group consolidation plan.
Publicis Groupe and Omnicom had been in talks for a “merger of equals” in 2013, but the deal ultimately collapsed due to differences in structure and culture.
More changes are expected to take place in the global landscape in the coming year, with the smallest of the “big six” holding groups, Havas, about to be spun off from parent Vivendi.
Havas is expected to be listed on the Amsterdam stock exchange later this month.
Omnicom has been run by John Wren as CEO since 1997, while Philippe Krakowsky has been CEO of Interpublic since 2021 when he succeeded Michael Roth, who had led the group for 15 years.
‘Highly complementary’
Wren 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.
“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.”
Krakowsky added: “This combination represents a tremendous strategic opportunity for our stakeholders, amplifying our investments in platform capabilities and talent as part of a more expansive network. 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.”
Wren will remain chairman and CEO of Omnicom, while Phil Angelastro will remain executive vice-president and chief financial officer.
Krakowsky and Daryl Simm will become co-presidents and co-chief operating officers. Krakowsky will also be co-chair of the integration committee post-merger.
Three members of Interpublic’s board, including Krakowsky, will join Omnicom’s board.
A version of this story first appeared on The Media Leader France. Additional reporting by The Media Leader UK.
This article was updated following confirmation of the merger