Tax row exposes hollow logic of Publicis-Omnicom deal
The POG merger was originally trumpeted as a logical sharing of cultural values but it now looks as though the whole deal is predicated on tax – and that is really not a good place to start, writes Dominic Mills.
If you’ve ever looked into the eyes of anyone who lives in Monaco or other tax havens like the Isle of Man, you won’t see much. That’s because they’re without soul. A life founded on tax minimisation is a hollow one.
So what do we make of the news last week that the Publicis-Omnicom deal has hit some major tax-shaped bumps in the road?
According to Omnicom boss John Wren, difficulties getting tax sign-off in France, the UK and Netherlands could threaten the entire deal. “Those things are a requirement to get a closing,” he said.
This is a bit of a surprise. Far from the logic of size and the sharing of cultural values trumpeted back in July last year by Wren and his (then) new best mate Maurice Levy, it now looks as though the whole deal is predicated on tax or, to be more precise, tax-minimisation.
And a construct based on tax is not a good place to start, all the more so if, as Wren hinted when he said “there is no Plan B”, tax is the sole determinant of whether the deal goes ahead.
Of course, it is entirely possible that the flagging up of these tax issues is actually a smokescreen for more deep-rooted and fundamental problems. Certainly, just a few days later Nasdaq claimed that disagreements about the terms of the deal are such that the 70 integration committees representing both sides, and whose role is to map out how they would work together, have put their pens down for now.
It’s quite possible that the two sides have realised they hate each other, so if the deal does collapse, then blaming tax difficulties is less humiliating than admitting the whole concept was flawed from the start.
But only marginally less humiliating. You can’t pretend that Plan A is the best thing since sliced bread and then, when it doesn’t happen, say that it didn’t really matter and everything is going to be just dandy operating on your own.
The credibility of both Wren and Levy will be in tatters, and they will be mortally wounded.
Mind you, if I was a mere underling in either Publicis or Omnicom I might be secretly relieved. Apart from all the politics and job insecurity surrounding the merger, people in the agency business go to work because they want to do great stuff and help their clients. The idea that their ultimate purpose is to contribute to an organisation focused on tax-minimisation is morale-destroying and saps the soul.
Given the recent relative performances of both Publicis and Omnicom, as measured against that of WPP, you have to wonder if the downturn in morale and the energy expended on the merger isn’t already having an effect.
Last Friday, WPP reported worldwide Q1 revenues up 7%, while earlier in the week Omnicom announced a rise in global revenues of just 4.3%, and Publicis 3.3%. Even dear old Interpublic, the runt of the litter, did better than the latter two with a 6.6% rise.
And those figures exclude a stellar run of results in April for WPP, including media for Vodafone, Compare the Market and Marks & Spencer, adding in total something like £1bn to its billings.
Meanwhile, Sir Martin Sorrell continues to sew mischief, his latest salvo a suggestion to Reuters Insider that his best hope was that the deal went ahead because Publicis and Omnicom would then fight like two cats in a sack and that would benefit WPP. Cheeky or what?
So long JWT, hello J. Walter Thompson
It’s not exactly hold-the-front-page stuff, but news that JWT is to rebrand as J. Walter Thompson in its 150th year is intriguing.
Actually, ‘rebrand’ isn’t strictly accurate. The name J. Walter Thompson is a return to the agency’s roots, the moniker being that of its founder, ‘Commodore’ James Walter Thompson.
Those with long memories will know that, for years, J. Walter Thompson was the ultimate establishment agency. Its work was clever and invariably tasteful, and it carried itself with an air of effortless superiority – just like the staff it employed, almost all of whom were educated at private school and Ivy League or Oxbridge.
About 10 years ago, however, it decided that this positioning was outdated, and in the fashion of the time, when meritocracy and classlessness were de rigueur, it renamed itself JWT – and promptly lost whatever distinctiveness it had.
In the UK, this was around the time it moved from posh Mayfair’s Berkeley Square to blingy, Euro-trash, Knightsbridge. Enough said.
In effect, the return to the original name is an admission that the agency no longer stands for anything – well, that’s how I translate what its boss Bob Jeffrey means when he says it’s all about “re-igniting the agency’s values and soul.”
Hmmm, in fact when you think about that statement, it’s a terrible admission of his own leadership failure. What has happened to the agency that it lost its “values and soul”? That may explain why he is about to retire.
Will the new old name stick? In part that depends on the efforts of journalists and commentators like me. One problem is that J. Walter Thompson is much harder to fit in a headline than JWT, plus it takes a lot longer to type out. I wish them luck.