‘Publicom’ and the Grand Old Duke of York
Now Publicis and Omnicom have terminated their merger plans, bosses Maurice Levy and John Wren have had their credibility torn to shreds, writes Dominic Mills. So what happens next?
We all know the nursery rhyme about the Grand Old Duke of York, essentially a parable about futility.
“Oh, the Grand Old Duke of York
He had ten thousand men.
He marched them up to the top of the hill
And he marched them down again.
“And when they were up, they were up.
And when they were down, they were down.
And when they were only half-way up,
They were neither up nor down.”
And that, effectively, is what Maurice Levy and John Wren have done to their combined 130,000 Publicis-Omnicom troops. In July last year, they marched them up to the top of the hill. Then, during the prolonged negotiations of the last nine months, they left them neither up nor down. Now, after last week, they’re down again and wondering what happens next. It feels like the ultimate in futility.
As the mutual recriminations break out, it increasingly looks as though the so-called tax issues delaying the merger were a smokescreen for major-behind-the-scenes rows and a titanic and irreconcilable clash of cultures.
So what does happen now? Well, both Wren and Levy look exposed, their credibility torn to shreds. Will they survive? Levy at least has one highly supportive shareholder, Elisabeth Badinter, daughter of Publicis founder Marcel Bleustein-Blanchet, on his side. She has been with Levy on every step of his journey to build Publicis into a global force. He better hope she sticks with him.
Wren, however, may be more vulnerable. The institutional investors who own Omnicom are typically less forgiving of cock-ups of this magnitude.
But neither Levy nor Wren, as one former Publicis executive told me, have growth plans or succession plans in place. That’s why they did the deal in the first place. That further weakens their positions.
Indeed, it is worth looking at the love bombs Levy and Wren sent each other during their courtship phase. Wren admired Levy for Publicis’ digital assets; Levy loved Omnicom’s creative shops and culture.
This was code for admitting that Omnicom was weak in digital, and Publicis weak in creativity. As the number of global mega-pitches ratchets up (Samsung, for example), this is an obvious area for clients to probe and rivals to exploit.
So, if we look at the short and medium-term effects of the fall-out, it’s clear that these are the two areas both sides will be buying in.
That must give immense cheer to small-and medium-sized indies. If the merger had gone ahead, there would have been fewer possible buyers – WPP, Aegis, IPG, Dentsu. Now there will be more, and no doubt Publicis and Omnicom will be prepared to pay top dollar, so prices will go up.
This is especially true of ad tech and data companies, which traditionally start off as independent, entrepreneurial outfits anyway and then sell up. A major stated rationale for the deal was the need to take on the likes of Google, Facebook and Twitter. In a nutshell, anyone who’s got an algorithm (and who hasn’t these days; it’s de rigueur) could be in clover.
But, relatively speaking, these are small, incremental, fill-in deals. They are not game-changers. Having gone on record as saying scale matters and they need it, both Publicis and Omnicom are the most likely candidates to do a big deal: the trouble is, there are only two credible candidates – IPG and Havas – and, having failed once, will their shareholders trust them to try again?
Maybe not so long as the current regimes are in place.
IPG looks the most likely target, partly because it’s been limping around the scene for the last few years anyway, and unlike Havas, where the dominant Bollore family effectively control its fortunes, its shareholders would cash in if they had the chance.
The influential Wall Street blog The Street certainly thinks so.
This is where the result of the massive Microsoft pitch last month becomes interesting. IPG may have triumphed creatively, with McCann the big winner, but it lost out big-time in media, the $1bn prize going to Dentsu/Aegis, having previously been split between Starcom (Publicis) and IPG’s Universal.
To play in the media game these days, you need a clutch of chunky multinational accounts, and one former IPG Mediabrands (Universal and Initiative) executive tells me that outside the US, with the exception of Unilever and Amazon, Mediabrands looks bereft on that front.
So, a resurgent McCann may have created a scenario in which IPG could credibly focus on its creative offering and dump media. As things currently stand, Mediabrands outside the US will struggle to compete with GroupM, Aegis and even the Publicis and Omnicom media outfits on price, let alone all the other things that go to make up a modern media network.
Indeed, some might say, it has only managed to stay in the game up to now by relying on its planning and digital capabilities. Without the buying revenue, it will find it hard – futile even, thinking of our old friend the Duke of York – to invest in these.
So the choice is a tough one: manage decline, with even more losses to come and the negative effect that that will have on the IPG mothership; or get out altogether and acknowledge that for it, the opportunity is gone.
One of the interesting things about the Microsoft pitch is that it blows a hole in the idea that the global mega-pitches are always about picking one holding company to do everything, as Aegis has found to its benefit. Big clients will continue to pick and choose.
That being so, it’s possible to believe that IPG has a future without a media operation. But if it is going to get out of media, it better get on with it while there’s still something to sell.
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