Massive Ad Industry Merger Collapses

The $US35 billion merger between Omnicom and Publicis Groupe SA has been called off, the Wall Street Journal reports, citing sources.

The merger, first announced this past July, would have created the world’s largest advertising holding company, dethroning current No. 1 WPP.

The merger’s implosion was foreshadowed by recent reports from the Wall Street Journal, which said the two sides were struggling to get the combined company, planned to be based in the Netherlands, registered as a tax resident of the United Kingdom.

Additionally, Omnicom and Publicis were said to be sparring over who would get to be the chief financial officer of the merged company. Omnicom wanted its chief financial officer, Randall Weisenburger, to have the position, while Publicis was pulling for its own CFO, Jean-Michel Etienne. France’s Publicis and the United States’ Omnicom were also unable to decide which company would legally acquire the other.

This past Friday, Albert Fried analyst Rich Tullo pegged the probability of the merger’s completion at just 40%.

Had it been completed, the merger would have brought many of the world’s most prominent advertising and public relations agencies under one roof, including Omnicom agencies BBDO, DDB, and Ketchum, and Publicis agencies Saatchi & Saatchi, Leo Burnett, and BBH.

The idea was to provide the combined company with the sort of scale required to maintain leverage against online advertising companies like Facebook and Google, platforms on which Omnicom and Publicis’ clients are spending more and more of their budgets these days. By buying ads in greater bulk, Omnicom and Publicis would theoretically be able to fetch lower prices and pass those savings on to their clients.

One person who is sure to be pleased by the news is the highly competitive WPP CEO Sir Martin Sorrell, who is bitter rivals with Publicis CEO Maurice Lévy.

Since the merger’s announcement, Sorrell has taken every available opportunity to insult Publicis and Omnicom, attacking them for what he said would be a “clunky” corporate hierarchy on a conference call back in August.

It was then that Sorrell said combining the two companies’ corporate colours (Omnicom’s orange and Publicis’ purple) would create a “sludgy brown” mixture.

Secure in his position as head of the word’s largest advertising company, Sorrell told the Financial Times that the deal “seems to have been driven by emotion to knock WPP off its perch and, of course, by French charm.”

He added: “In the end, it was a case of eyes bigger than tummy.”

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