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Will Ad Agencies Feel An Urge To Merge Following Omnicom’s Deal With Publicis?

By | Sunday July 28, 2013 @ 7:42am PDT

In a word, yes — which could make them much more formidable when they approach TV networks to negotiate ad rates. Up to now agencies have had mixed thoughts about mergers. The financial advantages, including the ability to cut costs, often are outweighed by the need after a deal to jettison big clients who compete with each other. In Omnicom Group’s new merger agreement with Pubicis Groupe — officially announced this morning following widespread reports about it this weekend — the combined entity might have to pick between Coke and Pepsi, AT&T and Verizon, Nissan and Toyota, and Google and Microsoft. But arguments in favor of mergers become much more compelling if antitrust officials in the U.S. and Europe approve the creation of Publicis Omnicom Group. (The companies call it a merger of equals that should close by the end of Q1 2014.) Last year the two companies together generated $11.4B in revenues from the U.S., more than twice as much as WPP which would become the No. 2 agency. The merger would make Publicis Omnicom a compelling choice for blue chip advertisers, in part because it likely would have the best technologies and resources to track how ads are performing over multiple media. Others will have to respond by making their own merger deals says Pivotal Research Group analyst Brian Wieser. Interpublic “will immediately be considered to be in play,” he says as he raised his stock price target for the ad company to $21 from $16.  Currently the No. 4 agency worldwide behind WPP, Omnicom and Publicis, Interpublic offers “the best solution” for WPP, Havas and Dentsu as they look for options. Read More »

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UPDATE: Ad Giants Omnicom And Publicis Agree To Merge: Report

By | Saturday July 27, 2013 @ 9:56am PDT

UPDATE, 1:00 PM: Looks like it’s a done deal, with an announcement planned for Sunday in Paris, The Wall Street Journal says. The new entity will be called Publicis Omnicom Groupe. The partners’ current CEOs — Omnicom’s John Wren and Publicis’ Maurice Levy — will be co-CEOs. One of the first challenges: sorting through potential client conflicts including Coke and Pepsi.

PREVIOUS, 9:56 AM: Major TV network owners including CBS, Viacom, and Discovery will be watching this one closely: The two ad companies, which together account for about 40% of U.S. sales, are in “late-stage merger talks,” Bloomberg reports citing someone “with knowledge of the situation.” The deal would be structured as a merger of equals to create the world’s largest ad company with a market value of more than $30B. The plan has “significant industrial logic to it, and thus shouldn’t be ruled out as plausible,” says Pivotal Research Group analyst Brian Wieser. The combined company could raise its fees because it would face less competition, the thinking goes. Omnicom’s properties include BBDO Worldwide, TBWA Worldwide and DDB Worldwide Communications Group and its client base includes household names such as Apple, McDonalds, Johnson & Johnson, Volkswagen, and ExxonMobil. Paris-based Publicis has Publicis Worldwide, Leo Burnett Worldwide and DigitasLBi with clients including AllState, AT&T, Citigroup, CocaCola, Comcast, Fox, Kellogg’s, and Samsung. Antitrust officials in the U.S. and in Europe likely would take a dim … Read More »

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