GroupM CEO John Steedman has warned rivals Publicis and Omnicom that they face a long hard road ahead attempting integrate two very different cultures while looking for $500 million in “efficiencies” after the two announced a merger.
It was announced yesterday that Omnicom and Publicis, two of the world's top largest advertising holding companies, have agreed to merge into the world's largest agency, Publicis Omnicom Group, with a market value expected to exceed $US35 billion ($37.9 billion).
Steedman (pictured) told B&T that he wasn’t overly surprised by the announcement, but said the new Publicis Omnicom entity faces several major challenges, which will most likely lead to staffing being hit.
"You’ve two companies that are virtually identical in terms of revenue and billings, so if any two were going to do it, it was these two," said Steedman.
"It will be interesting to see how the French and Americans get on. It’s a massive task, especially when you take into account they are looking to save $500 million in costs. Where is that going to come from? Obviously there will be something through staffing as they look for more efficiencies."
He added that bringing two very different cultures together takes time and will not be an easy ride.
"Developing a culture takes onwards of five years to do. I’m not suggesting the cultures will change inside the agencies, which will obviously keep their culture maintained. But a new culture will have to be developed, it's not an easy task,” said Steedman, adding that the new company will have a lot of inward looking to do for some period of time.
Another facet of the merger is where it leaves Havas and Interpublic in advertising's global hierarchy.
"I guess the interesting thing is where it leaves the likes of Interpublic and Havas, there’s a question whether something will evolve out of that as a consequence of the merger,” said Steedman.
Luke Littlefield, CEO, Aegis Media Australia & New Zealand, told B&T it’s a bit too early to discuss any local impact the merger will have for clients.
"The client benefit of the Publicis Omnicom merger is yet to be articulated. Once that is clearer, we will better understand what it may mean for the local market.” said Littlefield.