Omnicom and Publicis call it off

Did internal clashes derail the mega-merger?

On a sleepy summer weekend last July Publicis and Omnicom rocked the ad world with a surprise merger announcement. Now the two have done it again, formerly announcing late Thursday that their proposed deal was off.

Happier Days: Last summer Publicis CEO Maurice Levy and Omnicom CEO John Wren signed a deal in Paris that would have made them the top advertising holding company in the world. On Thursday the deal fell apart.

The New York Times appears to have broken the imminent demise of the merger, citing “people close to the deal” who said a clash of personalities between the CEOs of the two holding company giants—Publicis Groupe CEO Maurice Lévy and Omnicom CEO John Wren—as a reason for the collapse.

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“A mix of clashing personalities, disagreements over how the companies would be integrated and complications over legal and tax issues derailed the deal nine months after it was announced,” reported the Times.

By early evening, a joint release from the two companies—New York-based Omnicom and Paris-based Publicis—confirmed their dream was over, citing “difficulties in completing the transaction within a reasonable timeframe.”

Maurice Levy, the strong-willed head of Paris-based Publicis, denied it was a question of a personality clash with John Wren, his counterpart at Omnicom, but rather a fundamental difference on balancing the leadership of the new firm. Levy said he was deeply disappointed that the deal announced last July fell apart.

But, he said, “balance means balance.”

The Guardian quoted Wren as saying there was “no one factor” that ended the deal. “There are a lot of complex issues we haven’t resolved. There are strong corporate cultures in both companies that delayed us for reaching an agreement. There was no clear finish line in sight.”

The value of the deal had been estimated at $35 billion and would have created the largest advertising holding company in the world, bringing together such historic agency brands as Leo Burnett, Publicis, DDB and BBDO on the creative side and media heavyweights like PHD, ZenithOptimedia and OMD.

Moreover, the merger was designed to give the holding companies and their agencies a better position on tackling the changing digital landscape, competing (or at least dealing more easily) with the Googles and Facebooks of the world – which often work around agencies to work with clients directly by leveraging their expertise in search, data tracking, social and digital media. When announcing the deal, Publicis and Omnicom weren’t using words such as “creativity” or “insights” (which one might expect of big creative enterprises) in their public statements, but instead spoke of big data and new technology, indicating where they felt future revenues could be found.

But the sheer scale of the combined organization (dubbed Publicis Omnicom Group or “POG”) was also supposed to have been a benefit to the expanding agencies under its banner. While Publicis has been investing in its digital bona fides over the last few years, Omnicom had been making inroads into emerging South American and Asian markets.

“If you follow the global digital media model, what it tells you is that what you’re going to need to service clients is global digital agencies – both on the media buying and creative side of things,” said Brett Marchand, vice-chairman of Vision 7 International, when the deal was first announced. Global scale, he said, is becoming a must-have with most major advertising clients.

With the POG deal cancelled, Sir Martin Sorrell and his WPP retain the title of the world’s biggest advertising holding company. Late last month, Sorrell had mocked the two for the tax troubles complicating the deal, saying it was “turning into a soap opera.”

The Omnicom and Publicis deal would have seen the merged company incorporated in the Netherlands but paying taxes in the U.K. which has introduced more favourable corporate tax rates in recent years.

There has been speculation in recent weeks that French authorities were reluctant to approve such a deal with growing populist pressure in France and across Europe to crack down on corporations getting tax relief while much of the rest of the continent is dealing with austerity measures.

Though on Friday, Sorrell said the collapse had more to do with Levy and Wren overreaching and not being able to work together.

“The loss of clients, the loss of people has taken its toll,” he told Reuters. “It’s not to do with tax, it’s more to do I think with ego and the emotional thrill of trying to knock WPP off its number one perch.“

In recent weeks, it appeared that both Omnicom and Publicis were growing frustrated by speed bumps in the approval process, but senior agency executives and clients were both reportedly taken by surprise by Thursday’s announcement.

The statement from Publicis and Omnicom included a joint quote from both Lévy and Wren: “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.”

“We, of course, remain competitors, but maintain a great respect for one another.”

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