Omnicom-Publicis merger puts Coca-Cola, PepsiCo under one umbrella

Jul 29 2013, 13:46 IST
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Maurice Levy, chief executive of French advertising group Publicis and John Wren, head of Omnicom Group pose during a joint news conference in Paris. (AP) Maurice Levy, chief executive of French advertising group Publicis and John Wren, head of Omnicom Group pose during a joint news conference in Paris. (AP)
SummaryMega-merger between global ad agencies to create biggest advertising group, worth $35.1 bn.

A proposed mega-merger between global ad agencies Publicis and Omnicom could bring rival accounts such as Coca-Cola and PepsiCo under one firm, underscoring the scale of the $35.1 billion deal and the potential conflicts it raises.

The companies said on Sunday that the deal - presented as a merger of equals - would give the combined firm the necessary scale and investment firepower to cope with rapid changes wrought by technology on the advertising business.

At a press conference in Paris, the CEOs of the two companies pledged they could handle concerns from major clients who may find the marriage too close for comfort, as well as address questions from regulators who are concerned about maintaining a competitive landscape.

"This is a new company for a new world," Publicis Chief Executive Maurice Levy said. "It will be able to face the exponential development of new Internet giants like Facebook and Google, changing consumer behavior, the explosion of big data, as well as handle the blurring of roles of all the players in the market."

Levy said both companies had years of experience setting up "strict firewalls" to protect clients' interests. Even so, the deal is likely to create some instability as rival ad agencies try to poach clients while Publicis and Omnicom are distracted by the merger.

"This is going to cause turmoil within the industry," said a senior industry executive. "Everyone is going to reassess where they stand and every company outside of Omnicom and Publicis will be all over their clients during this period."

Morningstar analyst Michael Corty said large clients, such as Omnicom's PepsiCo, AT&T and Microsoft Corp, as well as Publicis' Coca-Cola, Verizon and Google Inc, were used to having leverage in negotiations as they push agencies to give them better payment terms.

"We're getting to a new frontier now and major companies might not like the change," he said.

The jumbo transaction size is rare among the world's "Big Six" advertising groups, which have spent the past few years buying up much smaller targets in emerging markets and among Web marketing specialists. If completed, it will shift focus on those left standing alone, such as current leader WPP, U.S.-based Interpublic, France's Havas and Japan's Dentsu.

Martin Sorrell, chief executive of WPP, said the pressure for rivals to respond will be great. "It's an extremely bold, brave and surprising move," Sorrell said in an interview on Sunday. "Further consolidation of our industry is

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