That’s one hell of a way for the agency holding companies to end the year.
Just as everyone was looking to slow down and take a holiday-induced break before what will be a turbulent 2025, along comes Omnicom with a proposed stock-driven acquisition of Interpublic Group. The two CEOs — Omnicom’s John Wren and IPG’s Philippe Krakowsky — shared on their conference call Monday morning to announce the deal that have been discussing this combination for the better part of a year.
Suffice it to say that, should the deal clear regulatory and shareholder approvals — (those CEOs are hoping it will clear in the second half of 2025) — the combined $30 billion revenue will give the industry the equivalent of a megalodon shark in a sea of great whites and hammerheads.
Lest we forget, megalodon went extinct because it was simply too big. So before panic sets in too significantly for the likes of WPP, Publicis and Dentsu, and the myriad independent agencies that have made a living feeding off the fish that the sharks don’t eat, this kind of bigger isn’t always seen as better.
But to hear Wren and Krakowsky tell it, this merger makes more sense today than ever. They have their eyes on the Googles and Metas of the world. So much that Krakowsky referred the combined company as a platform rather than a holdco.
“Being a part of what is now a platform, essentially a company with exceptional talent and reach and capabilities, and knowing that you can bring those to bear for your client, or that they’re going to give you an opportunity, as John [Wren] says, to build a more interesting career — there’s a lot of enthusiasm for it inside our organization,” he told analysts and reporters on a Monday morning conference call with Wren and both companies’ CFOs.
The combined entity would become by far the largest holding company in the communications world, with an expected cash flow of more than $3 billion, according to the information provided by the companies. The principals also cite the complementary resources and geographies.
A few examples:
- Uniting IPG’s Acxiom data capabilities with Omnicom’s Flywheel e-commerce prowess and the massive Omni orchestration platform (IPG also has Interact but it’s less well known) could generate a deeper level of insights on consumers on clients’ behalf.
- Omnicom has enjoyed a marketplace advantage with its principal media usage, something IPG has stated it wants to leverage more — now they can share that practice.
- Geographically, the combined company establishes the U.S. as its strongest region, which analysts agree holds the best prospects for business and growth. According to the info provided by both companies, 57% of their revenue is generated in the U.S.
But the truth is, both companies needed to do this. Of the six sources reached for this story, all noted that IPG has not had a good stretch the last few years, having lost Amazon, General Motors and several other large and small clients that outweighed its gains. Two sources even said they see Omnicom’s acquisition as a bit of a bailout.
“I think this is a very welcome distraction from what has been a disastrous year for IPG,” said one executive outside both companies, who declined to speak for attribution.
Added David Jones, CEO of Brandtech Group, a rival to both holdcos: The acquisition “makes huge sense in the short term — both have been having their lunch eaten by Publicis, and IPG declined last year in organic growth. This gives both of them a story for their shareholders. It gives the merged company the ability to carry out financial re-engineering and restatements that will help the numbers look better in the short term.”
Ouch.
Meantime, the union doesn’t come cheaply. In the Monday conference call, Wren cited $450 million in “one-time cash cost” to close the deal and achieve $750 million in “cost synergies” — which includes layoffs among the 100,000 employees of both holdcos. Oddly, Wren did add, and employees of both companies should take note: “Any employee listening to this, if you’re associated with any revenue stream at all, you’re gold, don’t worry about it.”
Observers of the deal don’t think things will end up quite so magnanimously for staffers, particularly those in back-office roles. “This deal will no doubt create a lot of uncertainty for staff and clients on both sides,” said Ryan Kangisser, chief strategy officer at media consultancy MediaSense. “Notwithstanding the cost synergies (and implications this will bring), clients will be considering how their requirements will be met during an extreme period of transition and transformation.”
How is the rest of the agency world affected? For one, it will most likely set off a chain reaction of M&A, because no other holding company can stay put as they are. “I expect to see more M&A activity on the back of this deal,” said Kangisser. “It’s easy to forget there are a number of very well funded, and highly acquisitive challenger groups who will look to fill this vacuum and provide clients with greater optionality.”
“Start looking at all these other combinations,” said another high-level agency executive who declined to speak on the record. “The other guys are going to have to do something. I think this is the starting gun for major, major consolidation.”
Every source reached for this story had their own scenario that could unfold. WPP, which has just been leapfrogged in size and scale, has long been the subject of breakup rumors. Havas just got spun out by parent company Vivendi, making it easier to pick by the likes of, say, Accenture or Dentsu. And Publicis, which analysts see as neck and neck with Omnicom in its success in the marketplace, isn’t likely to be left in the dust, despite already having acquired Influential and Mars United Commerce earlier this year.
Nor should Omnicom itself be precluded from other purchases. Wren said the the $3 billion in cash flow would allow the company to continue to be acquisitive.
For independents who have staked their claim to being the antidote to the holdco system and process, Christmas seemingly has come early. The deal “provides the independents the room to be able to articulate their propositions,” said Jay Pattisall, vp and senior agency analyst at Forrester. “Their counterpoint is skill, and this just helps frame their proposition of being able to balance the buying scale that they’re accumulating with the performance scale that they’ve developed.”
And how will clients feel about this? Amazon just left IPG and gave some of its media business to Omnicom. Will this stir up unhappiness? Wren and Krakowsky poo-poo’d any notion that clients will have a problem with the acquisition.
Jay Wilson, an analyst at Gartner, noted that the size of client will impact how much they’re affected. “It’s unlikely any single client will see an immediate impact on its relationship with existing IPG or Omnicom agencies, and those with large relationships at a holding company level will probably see the slowest transition — for example to a new hold-co wide data spine like IPG’s Acxiom,” said Wilson. “Clients of single agencies within these networks may be the first affected, if and when the new organization decides to merge individual agencies, as many hold co’s have been doing in recent years.”
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