It wasn’t exactly a surprise to see the merger between Omncom and Publicics collapse. We had our doubts when the deal was announced last year. Still, there are some clear winners and losers. Here’s our list.
The Winners.
The deal’s bust-up strengthens several players, here presented in no particular order of significance:
1. Martin Sorrell. He continues to head the biggest agency conglomerate and will no doubt keep his prized seat at Davos. The man could barely contain his glee over seeing his rivals stumble.
2. Omnicom shareholders. Shares in Omnicom have rallied since the deal broke down, probably reflecting investors’ relief that ugly tax issues were avoided and Omnicom’s management won’t be distracted from a difficult integration.
3. Middle managers. No one was set to suffer more in the combination of two giant companies than the army of accounting, human-resources and IT staffers at Publicis and Omnicom. They had “cost synergy” stenciled across their foreheads. They can now breathe easy and get back to their meetings, power-points and spreadsheets.
4. Clients. Very little was ever said about how the merger was going to benefit clients. Indeed, it likely would have created more conflicts between rival agencies – already a big issue at the conglomerates. Bigness has never produced better thinking or breakthrough ideas. Clients know this and are relieved.
5. Small agencies. Boutiques and mid-sized firms will no longer benefit from the distraction the deal would have caused for a combined Omnicom-Publicis. But they will benefit financially from the fact that both companies will now be even more aggressive about their own acquisitions.
The Losers.
There are plenty of losers from the deal’s aftermath, and some are not so obvious:
1. The advisers. The investment bankers, attorneys, accountants and consultants won’t enjoy a lavish payday now that the deal has been axed. They’ll get a nice check for their efforts along with mild embarrassment. But memories are short and they will move on to arranging other deals.
2. The CEOs. The deal’s collapse is a blow to John Wren and Maurice Levy, who poured champagne, kissed on both cheeks and promised to make their co-CEO arrangement work even though it has failed everywhere else it’s been tried. The loss is especially hard for Levy, who now hands his board a difficult CEO succession process.
3. Regulators. Although Omnicom and Publicis were quick to point fingers at regulators for delaying the deal, there is something to their criticism. Regulators have a legitimate role to play in big mergers, but their process needs to be timely, clear and purposeful. In this deal, regulators were starting to look obstructive, which could chill other, more sensible deals.
4. The conventional wisdom. Two concepts have driven the ad-agency business over the past thirty years: scale and conflict avoidance. Agencies got bigger to better match the reach of global clients and convinced them that conflicts were best handled by keeping agency brands and management teams intact. But bigness no longer is an advantage in a world upturned by technology, and clients are extremely worried about whether the best minds at big agencies are working for them or someone else. Both concepts collapsed with this merger.