Quantcast

This is where it all went wrong for Publicis and Omnicom’s (now axed) $35bn merger

0

Well, at least Sir Martin Sorrell is having a good day. He will no doubt be revelling in the fact that his company, WPP, is holding onto its crown position as the world’s largest communications services group, following the news that Publicis and Omnicom have scrapped their plans for a $35bn merger.

The deal would have formed the largest advertising company in the world, and was billed as a “merger of equals”.

It was only in July that Publicis CEO and chairman Maurice Levy and Omnicom CEO John Wren were papped shaking hands and grinning ecstatically as they announced their plans.

So where did it all go wrong? Why has the mega-merger been called off? Here are the tell-tale insights you need to know:

1.       Clash of the titans

It doesn’t take a psychologist to deduce that there may have been a bit of an ego clash between two of the planet’s most powerful people in advertising.

And it’s been widely reported that there have been tensions throughout talks in recent months, including reports that the pair had decided earlier this year to keep their media agencies separate, and that the company cultures were looking pretty incompatible.

The Wall Street Journal reports that people close to the situation are saying “relations between the two sides had severely frayed”, with many problems coming straight from the two CEOs.

Apparently, there were issues over where the newly merged company would be located, and what the executive team would look like. This was particularly evident in November when the two companies gave different names for the CFO role to analysts.

And in a hint that all merging companies are equal, but some are more equal than others, Publicis’s Levy has said: “We wanted to do a merger of equals but this principle in the end was not respected.”

>> Why is Apple’s proposed acquisition of Beats “really puzzling”?

2.       Taking too darn long

The proposed merger was announced in July last year. It was meant to happen in the first three months of this year.

But it’s just been dragging out, due to tax issues, regulatory problems, specifics of the deal, and presumably all the rumoured in-fighting too.

In the joint statement, Levy and Wren said: “The challenges that still remained to be overcome, in addition to the slow pace of progress, created a level of uncertainty detrimental to the interests of both groups and their employees, clients and shareholders.”

3.    Bleeding money in multiple ways

By jointly deciding to call the deal off, the two advertising giants avoid the $500m penalty fee that one of them would have incurred if they’d decided independently to walk.

But the protracted process of trying to merge has been costing them both dearly.

The two companies have lost more than $1.5bn in client work in the past month alone, according to Brand Republic.

Notable moves include Publicis losing Microsoft, and Vodafone moving its $1bn account from Omnicom to Group M.

Business has clearly been suffering. Levy is reported as saying: “Prolonging the situation could have led to the diversion of the group’s management from its principle function: to best serve our clients.”

There have also been the costs involved in trying to finalise a deal. Omnicom had spent $7m in fees for professional service relating to the merger in the first three months of this year alone, according to Brand Republic.

Both companies have seen their share prices fall in recent months too.

**

All in all, it no longer seems all that surprising the mega-merger has been called off.

No doubt they’re cracking the bubbly out at WPP right now.

 

NOW READ: From survivor to superstar: 5 traits that power growth in uncertain times

From survivor to superstar - crowd theatre clapping success




Share.