It’s official—Omnicom has announced that it will acquire IPG, subject to regulatory approval.
It will be an all-stock transaction with IPG shareholders receiving 0.344 Omnicom shares for each share of IPG common stock they own. Once the ink has dried on the deal, which is still subject to regulatory approvals, Omnicom shareholders will own 60.6 per cent of the combined company. IPG shareholders will own the remainder.
The new combined company will have more than 100,000 staff around the world. The transaction is expected to generate annual cost synergies of $US750 million ($AU1.16 billion).
The new combined company would have a 2023 revenue of $US25.6 billion, adjusted EBITA of $US3.9 billion and free cash flow of $US3.3 billion.
Some 57 per cent of that combined revenue would come from the US, 43 per cent of it from the rest of the world.
Why?
“This strategic acquisition creates significant value for both sets of shareholders by combining world-class, highly complementary data and technology platforms enabling new offerings to better serve our clients and drive growth,” said John Wren, chairman and CEO of Omnicom.
“Through this combination, we are poised to accelerate innovation and harness the significant opportunities created by new technologies in this era of exponential change. Now is the perfect time to bring together our technologies, capabilities, talent and geographic footprints to bring clients superior, data-driven outcomes. We are excited to welcome Philippe and the entire Interpublic team to the Omnicom family.”
“This combination represents a tremendous strategic opportunity for our stakeholders, amplifying our investments in platform capabilities and talent as part of a more expansive network,” said Philippe Krakowsky, Interpublic’s CEO.
“Our two companies have highly complementary offerings, geographic presence and cultures. We also share a foundational belief in the power of ideas, enabled by technology and data. By joining Omnicom, we are creating a uniquely comprehensive portfolio of services that will make us the most powerful marketing and sales partner in a world that’s changing at speed. We look forward to working with John and the entire Omnicom team.”
These “highly complementary” offerings will see the new company deliver end-to-end services across media, precision marketing, CRM, data, digital commerce, advertising, healthcare, public relations and branding.
It’s no secret that Omnicom has remained behind WPP and has fallen behind Publicis. This new acquisition would make Omnicom the largest agency holding company in the world, with around $US5 billion more in revenue than WPP.
A decade ago, Omnicom courted Publicis on a potential merger. However, this deal was canned after a year of negotiations and planning. Since then, Publicis has gone on to outstrip the rest of the industry and posted a net revenue of €13 billion ($AU21.47 billion) in February this year. While WPP remains the largest of the big advertising holding companies, all of them have struggled to keep pace with Publicis in recent years. Earlier this year, B&T was privy to many conversations in Cannes about a potential Omnicom-and-someone mega-merger, though it was considered that Havas could have been another target.
Publicis has been highly acquisitive, bringing on consumer identity businesses such as Epsilon as well as ecommerce and digital transformation specialists to help service clients effectively in a market that has seen significant disruption from the large digital platforms.
Per the Wall Street Journal, which broke the story that this acquisition could be on the cards yesterday, the merger could help Omnicom and Interpublic become better equipped to deal with an industry increasingly driven by technology, data and artificial intelligence. Generative AI also threatens to disrupt how agencies get paid and could potentially diminish demand for copywriters, graphic designers and the ad buyers. How this all shakes out post-acquisition remains to be seen.
Agency Brands
However, it is clear that IPG and Omnicom do not enter the deal as equals—it is an acquisition, not a merger.
What happens to the agency brands is unclear at this stage, and it will likely remain that way for some time.
Omnicom last year started to centralise operations for its global creative networks, BBDO, DDB and TBWA. IPG’s creative offering is smaller, with only McCann and FCB. McCann isn’t the agency it once was. FCB remains impressive, particularly its New York office, though it isn’t the biggest.
Per Brian Weiser, “there are many smaller US-only agency businesses that are potentially duplicative in their current form. Presumably centralised back and mid-offices will be implemented, but arguably no holding company needs five creative agency brands. At the same time, efforts to reduce brands introduce risks around talent and client retention”.
IPG’s media offering is stronger but, again, it doesn’t seem likely that the Omnicom Media would necessarily benefit from adding UM and Initiative, save for integrating systems, technologies and skilled staff. The same is true for the PR agencies.
What the new combined business does around client conflicts also remains to be seen.
IPG also recently sold Huge. It remains unclear what will happen with R/GA which it is also trying offload.
Leadership
Wren will remain chairman and CEO of Omnicom. Phil Angelastro will remain EVP and CFO of Omnicom. Krakowsky and Daryl Simm will serve as co-presidents and COOs of Omnicom.
Krakowsky will also be co-chair of the Integration Committee post-merger. Three current members of the Interpublic Board of Directors, including Krakowsky, will be welcomed to the Omnicom Board of Directors.
Locally, there has been much change of late in the leadership of both companies. Peter Horgan, OMG’s Australian CEO, is due to step down in mid-2025. Current chief investment officer Kristian Kroon had been understood to be in the frame to be his replacement. However, this may now change.
Mark Coad is currently the Australian CEO of IPG—it seems unlikely that there will be enough room for both Horgan’s replacement and Coad in this new structure.
More to follow.
