The market seems to like the merger of marketing giants Omnicom and Publicis. Shares of both companies are trading higher this morning. Shareholders have good reason to be pleased, but for clients and staff the deal looks less appealing.
You’d think there would be more excitement for a multi-billion deal, particularly at a time when global merger activity has been in the dumps. Maybe it’s because the merger of Omnicom and Publicis looks more like a re-run of big mergers past, many of which came to tears, than the start of an exciting new era.
Sure, the deal tosses around all the right words (“best-in-class,” “true merger of equals,” ”synergies”), but it’s fundamentally an in-market combination of two slow-growth companies. Shareholders can see gains ahead from trimming costs and eliminating overlaps, and enough free cash to finance a nice dividend.
Of course, getting those financial benefits, estimated at $500 million, could be a challenge in a structure lead by co-CEOs. That’s not a model that’s enjoyed a great deal of success. (See RIM, maker of the Blackberry, for a recent example. )
Many observers worry that culture clashes could doom the deal, much as they did another big cross-border deal more than a decade ago: Daimler-Chrysler. But for all the hand-wringing, culture clashes are probably less of a worry than might be assumed. After all, Omincom and Publicis are holding companies, not operating companies. There’s unlikely to be much integration within the portfolio, aside from merging smaller players or specialized services. The big advertising agencies have operated independently under the watchful eye of their parent, and that’s unlikely to change.
Even if the units operate independently, I can’t imagine many clients are enthusiastic about this deal. Managing conflicts is already a complicated task for global brands, and it’s only going to get harder now. And smaller companies will rightly wonder if they’re going to get the agency’s best ideas, talent and attention.
The deal mirrors what’s been happening in banking, which has also been upended by new technologies and changing consumer habits. There, banks continue to consolidate and reach for larger clients to achieve scale and spread the cost of new regulatory requirements. Clients haven’t exactly turned cartwheels.
In banking and marketing services, consolidation has opened space for smaller, focused and more nimble firms to serve clients. Those folks are probably cheering today’s deal, since it means a very big competitor will be distracted for quite some time to come.