Could brands like BBDO, FCB, McCann & TBWA take a backseat in the new Omnicom?
As the global ad industry adjusts to there now being five global advertising holding companies instead of six, Green Square’s Barry Dudley asks what the absence of words such as ‘advertising,’ ‘creative,’ and ‘strategy’ might tell us about where Omnicom is heading.
What will the new Omnicom look like?
Although there have been all sorts of rumblings and rumors for some time, Omnicom is actually going to acquire IPG – subject to regulatory approval. It is a ‘stock-for-stock’ transaction, meaning that IPG shareholders will sell their shares in exchange for shares in Omnicom. So, despite lots of heady numbers, no cash is changing hands.
As the joint press release states: “Interpublic shareholders will receive 0.344 Omnicom shares for each share of Interpublic common stock they own.” Based on Omnicom’s share price at its last close ($103.43) this equates to $35.58 per share. IPG’s share price at its previous close was $29.26, so there has been a fairly hefty premium offered.
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The release went on to say: “Following the close of the transaction, Omnicom shareholders will own 60.6% of the combined company and Interpublic shareholders will own 39.4%, on a fully diluted basis.” This shows the relative sizes of the businesses.
What did the markets think? Not unsurprisingly, IPG’s share price has jumped – initially to $32.90 and then settling back to $30.30 by the end of the day’s trading. Conversely, Omnicom’s shares closed the day down 10.25% at $92.82, taking around $2bn off its value. Is that because the market thinks Omnicom is overpaying, or it just doesn’t think it is a smart deal? Here’s what the respective CEOs had to say…
“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 Omnicom’s John Wren. “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.”
His Interpublic counterpart Philippe Krakowsky put it like this: “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. We look forward to working with John and the entire Omnicom team.”
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Picking out a few words and phrases – “highly complementary data and technology platforms,” “new technologies, data-driven outcomes,” “platform capabilities,” and “enabled by technology and data” – it’s pretty clear where they are planning to take the combined business, although I was quite surprised not to see a single reference to AI. Without doubt IPG’s Acxiom (Audience Solutions, Data and Decision Sciences) and Omnicom’s Flywheel Digital (Digital Commerce) are going to be central. While Flywheel is a relatively recent acquisition for Omnicom (2023), IPG acquired Acxiom in 2018 so it has been embedded into the group: “IPG’s OPEN architecture approach flexes to what brands need, bringing our wide capabilities across over 74 agencies with Acxiom’s Customer Intelligence Cloud capabilities to help brands and people, win.”
And then a few words that are conspicuous by their absence: advertising, creative, strategy. There was mention of “innovation” and the “power of ideas,” but the bedrock brands that have stood front and center of these groups for many years appear to be heading to the back seats –BBDO, FCB, McCann, MullenLowe, TBWA et al.
There were a good few mentions of the “talent”. IPG’s website claims ‘approximately 55,000 employees’ and Omnicom has ‘70k+ people’. By my maths that’s 125,000 in total. According to the press release, the ‘new Omnicom will have over 100,000 expert practitioners’. There’s quite a difference between these two numbers, which will be partly explained by non-practitioners, the back office. But the ‘annual cost synergies of $750m’ will undoubtedly involve a significant proportion relating to headcount reduction. That’s a pretty unpleasant thing to have surrounding you at this time of year.
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And where will the clients end up in all of this? They will undoubtedly have more tools, platforms and data to play with, but I can’t help thinking that client service is going to suffer. So as the mega groups morph towards wannabe Metas and Amazons, the opportunity for smaller players to emerge and capture the ear and the wallet of clients is going to grow, with a wave of people stepping away (or being jettisoned). I also expect to see some exciting startups emerge.
My colleague Tony Walford wrote just a few days ago about Publicis becoming the biggest marketing services group by revenue. I wonder what Sadoun and Snoop Dogg have up their sleeves as their next move... WPP maybe?