Some champagne and a hug on Sunday symbolized the union between marketing giants Omnicom and Publicis Groupe. Seated on a rooftop overlooking the Arc de Triumphe on Sunday, the two companies announced a deal that could mean one mammoth advertising holding company.
A considerable shift in the way global advertising is currently accepted may be at hand.
In light of the merger that pushes up the market cap to $35 billion, the French seeded Publicis Groupe and the American born Omnicon Group have announced a decision to unite in a “merger of equals.”
The merged company has taken on a new name, Publicis Omnicom Group. The two CEO’s from each company are now co-chief executives in the new company.
The deal has not yet been closed, and in a joint statement the companies said it could close within the next quarter. Want to know how to identify it on the New York Stock Exchange and Euronext Paris? You will find the new company under the symbol OMC.
Naturally, the merger is backed by financial perception and together the earnings in 2012 were $22.7 billion.
Maurice Levy, CEO for the Paris-based Company, said the merger enables the companies to meet the advertising needs of the client.
“This combination will enable us to leverage the skills of our exceptionally talented people, our broad public offering, enhanced global footprint, and tremendous roster of global and local clients,” John Wren, CEO for Omnicom, said in a statement.
What both companies are looking to achieve with the merger is saving $500 million.
There are mixed reviews about the merger, with skeptics bringing up research released by Bain & Company in 2004. The research details were delivered in a concise manner the process by which only 30% of mergers succeed. This is loosely based on the facts of integration challenges, overestimation of synergies between the two companies and transferal and redirecting managerial and authoritative positions.
The confidence of both companies is convincing, even though the danger of a mass company that these two will become is omnipresent. Decrease in competition will result, this will be beneficial for the company but not for outsiders or potential clients.
The newly joined company, Publicis Omnicom Group, would be the proprietor of three out five of the world’s largest media company.
The head honchos of the merging large companies have each had their say too, with WPP CEO Martin Sorrell saying, “It’s an extremely bold, brave and surprising move,” he says, “It’s a great deal for Publicis. … Time will tell if the cultures will click and whether clients and talent benefit.”
Brian Wieser, a senior research analyst at Pivotal Research Group, has an interesting perspective, predicting most companies will end up fusing together. “With news of Omnicom and Publicis merging, Interpublic will immediately be considered to be in play by investors,” Wieser says.
Within such a monopoly, the company will have an incredible force in the market, being able to have almost first option for media space due to the company’s size.
Another perspective shared by a competitor explains that in order for there to be a fully serviceable company, the firms need to go beyond affirming the relationship and dive head first into a cohesive work dynamic within the newly formed company.
Before the announcement of the planned merger, Friday saw Omnicom close at $65.11, up 1.3%. Publicis closed at $59.35 euros, up 1.5%.