In this recent article in Campaign magazine, Lorna Tilbian joins other industry experts with her thoughts on the Omnicom-IPG merger.
The deal represents a monumental shift in the advertising agency landscape and would form the world’s biggest agency group.
The full article follows, with thanks to Campaign for their permission to republish:
The world’s biggest agency group would be formed after Omnicom agreed to buy Interpublic group.
Dubbed the deal of the decade, the “mega-merger” is set to shake up the advertising landscape, turning the big six into the five.
Ian Whittaker, founder of Liberty Sky Advisers, who is a financial analyst and writes the Investor View column for Campaign, said the combination of Omnicom and IPG will be likely to shake up the agency sector, as it creates a clear number one ahead of Publicis Groupe and WPP.
He said: “The big overlap between the two is in creative, not in media where IPG is a relative minnow, especially after the loss of the global Amazon account.”
Omnicom and IPG chief executives John Wren and Philippe Krakowsky spoke to Campaign about the deal.
Krakowsky said the merged company needed to move “at speed” to embrace “SaaS-like capabilities” – a reference to recurring revenues like software as a service, rather than more traditional agency-type fees and retainers.
Wren believes scaling up in data, technology and commerce is key to be the “premier marketing and sales partner” for clients.
So how did adland react?
It brings together two holding groups that have taken different strategic development journeys over the last 10 years. Omnicom Media Group are not just buying bigger, they are filling many gaps in capability in one transaction.
Short term, once a compelling narrative to existing and future clients has been established, they will be in a stronger position to deal as one particular frustrating competitor, as well as the rest of the market. Longer term the greatest gain may come from the market demand of really integrating media and creative services into a seamless offering.
While shareholders may celebrate the cost benefits of an Omnicom and IPG merger, clients and employees are unlikely to share the enthusiasm. Such large-scale deals come with cost-saving targets that often compromise talent, leaving employees feeling undervalued.
For brands, it’s doubtful that IPG or Omnicom clients wanted to join a larger ad network. Concerns about conflicts of interest and potential loss of key account personnel could disrupt the consistency brands value most. This may prompt brands to reassess their partnerships and evaluate whether their agencies are truly meeting their needs.
Smaller, more agile agencies prioritising clients’ interests could become more appealing. Independent agencies have shown resilience, adapting to market changes, while transparent, channel-neutral strategies may attract brands weary of the outdated, controversial principal-based trading model used by networks.
Well, something had to give, didn’t it? It’s the least expected combination: neither is known for its innovation and though this builds media scale, a lot of creative networks will need to be banged together to deliver the quoted cost savings.
Some mergers are like beautiful dances – two parties coming together to do something they couldn’t do on their own. This isn’t one of those. In a fast-moving world, there is huge benefit in being nimble and responsive to the opportunity. It’s unclear what the benefit is in being plain huge. Shareholders may be happy, clients and talent not so much. Which will create huge opportunities for the likes of us.
Agency holding groups have seen sharp competition from both online platforms and scrappy independents, driving the push to scale up and diversify their offerings. In terms of UK revenue, this merger would create a combined entity on par with WPP. Beyond simply bulking up, there’s real potential for margin improvement, as scale allows for more efficient investments in AI and other tech capabilities, which are increasingly critical for agencies. Publicis has shown how transformative this can be with its acquisitions over the last decade.
There’s also some strategic complementarity in the deal – IPG would significantly enhance Omnicom’s strength in healthcare, experiential marketing and other niche areas. While this move is about overall scale, as successful indies show, scale isn’t everything. Delivering for your clients strategically and creatively is the heart of the business.
This big bang consolidation play is an attempt to catch up to Publicis who threatens to break away from its holding company peers in terms of capabilities and performance. Publicis has a significant multi-year head start with its strategy focusing on integration (Power of One platform), data (Epsilon), tech (Publicis Sapient), and further highlighted by this year’s acquisitions of Influential and Mars [United Commerce] which position the Group positively in higher growth areas like creators and commerce.
Moving forward, there will be a big focus for Omni-IPG leadership on cost reduction, efficiencies and margin improvement, and leveraging those savings and synergies in the combined company to drive growth in data-driven media, principal trading and advancements in artificial intelligence.
And then there were three …
The key to this proposed merger with IPG in comparison to Omnicom’s earlier proposed merger with Publicis in 2013 is the ‘relative’ simplicity of the transaction against its European foray given these are two US companies with similar cultures and shared values in an expanded and transformed digital market. The deal rationale seems to be more about scale in order to invest in technology and focus on combined tech platforms, merging Acxiom data with the Flywheel transactional platform.
Interestingly, creative has hardly been mentioned except in the context of talent retention against a target of $750m cost and efficiency savings. Importantly, client conflict issues are also seen as less of a risk now given the partnership relationship of the integrated offerings. A new world, a new combination! What’s not new is the expected regulatory scrutiny of the deal across 15-17 regulators globally. We don’t expect completion until the second half of 2025, by which time the Trump Trade will be in full swing. Back home, the economic landscape will be different with a tax, spend and borrow backdrop, but near term deal disruption across the merger integration and cost saving period could present opportunities to WPP, and global agency consolidation could help rerate WPP’s relatively low PER (price earnings ratio) versus its global peers.
