Omnicom Group and Publicis Groupe to merge; new holding company christened 'Publicis Omnicom Group'

Less than a year ago, afaqs! carried a cover story around agency mergers and acquisitions. At the time, given the rate at which media giants were acquiring agencies, one of the predictions that emerged was: The number of global networks will reduce in the next five years. Well, as it turns out, it got the trend right but the timeline wrong. Just one-fifth the predicted time has elapsed and we're already looking at a new holding company, 'Publicis Omnicom Group', which is the result of a merger between Paris-based Publicis Groupe and New York-based Omnicom Group. The merged entity will be based in The Netherlands.

Publicis Groupe and Omnicom Group have a combined revenue of $22.7 billion (2012). The merged group has more than 1,30,000 employees. As per an official communiqué made public earlier today, "the transaction is a cross-border merger of equals" in which "Publicis Groupe and Omnicom shareholders will each hold approximately 50 per cent of the new company's equity."

Both, Publicis and Omnicom, have significant presence in India. Among Publicis' key agencies are Leo Burnett, Publicis Worldwide (Publicis Ambience and Publicis Capital), BBH and Saatchi & Saatchi on the creative front and Starcom MediaVest Group, ZenithOptimedia and Vivaki on the media front. Omnicom operates in India through DDB Mudra, TBWA, BBDO India and R K Swamy BBDO on the creative front and OMD and DDB Mudra Max on the media front.

For starters, consider conflicting business interests: This is something such deals invariably come with. Obvious global examples include the Coke-Pepsi clash (Publicis Groupe handles Coca-Cola while Omnicom handles Pepsi) and the P&G-Unilever clash (Publicis works on P&G brands while Omnicom works on part of Unilever).

If sleepy Sunday evening conversations are anything to go by, locally, industry folk seem unperturbed. Two reasons: Firstly, this market (and arguably, any other market) is no stranger to competition between sibling agencies that have the same parent network, working on competing brands. For example, Ogilvy and JWT both belong to WPP and have been handling rival chocolate brands Cadbury Dairy Milk and Nestle Kit-Kat, respectively. So, the joint pool of accounts that will now belong to the 'Publicis Omnicom Group' could easily be handled by different agencies within the group and be treated as businesses belonging to different groups under a common parent.Secondly, conflicting business was the very genesis of the 'second agency' concept, another model India is very familiar with.

According to some like Sudarshan Banerjee, managing partner, Utopeia, the concept of conflicting business is something clients need to "get over" quickly. "It's a thing of the past, especially with a merger like this one," he says, which in his opinion is one that will "finally give reigning leader WPP some competition." However, he points out that in the interest of data protection and maintaining confidentiality on client-related information, air tight groups and serious firewalls within the merged entity will become more important than ever.

Another area this development could affect in the days ahead is the local pitch-scene. Consider a pitch with eight agencies in the fray. The likelihood of seven of them belonging to one parent group and the lone eighth belonging to a different parent group is suddenly higher than it was. In such a scenario, the odds of winning new accounts in different markets automatically tip in favour of the network with maximum agency brands under it.

Speaking of the battle for new business, this development could increase competition for existing media agencies, once Publicis and Omnicom finalise a way to bring their media volumes together. "Media, at the end of the day, rests on scale. So from a media perspective, this merger means more volumes, shared tools and common ancillary products," says Divya Radhakrishnan, managing director, Helios Media. Even so, Madison (largest among the Indian independents), she insists, needn't worry because besides having done "a damn good job" as far as bagging MNC clients goes, the agency offers personalised servicing, something local clients crave for and something smaller, non-networked agencies are better poised to give.

Overall, experts feel it'll be a while before the implications of this merger begin to show in India. "It'll be a while before this starts affecting India. The roll-out will first happen in the West. Ultimately, yes, decisions regarding how to retain senior talent on both sides will have to be made," says Ashish Bhasin, chairman, India and CEO, Southeast Asia, Aegis Media.

Helping us end this piece with yet another timeline, he gives it around six to nine months before the impact of this merger becomes visible in India.