Omnicom-IPG merger: A new ad world order?

New Delhi: Omnicom Group is in advanced discussions about acquiring Interpublic Group.

If the merger goes through, it will establish the world’s largest advertising powerhouse, shifting the centre of influence from Europe—home to London-based WPP and Paris-based Publicis Groupe—to the United States.

The deal, potentially valued between $13 billion and $14 billion excluding debt, could be announced as early as this week, stated news reports. 

If the merger goes ahead, the combined revenues are projected to surpass $20 billion, based on 2023 figures, placing the new entity ahead of the UK’s WPP and France’s Publicis Groupe, which reported revenues of $15 billion and $13 billion, respectively.

The new conglomerate would boast an array of agencies, including BBDO, DDB, TBWA, OMD, PHD from Omnicom and McCann, FCB, IPG Mediabrands’ Initiative and Lodestar from Interpublic.

A combined entity would bring together a vast portfolio of agencies, each with specialised skills. This could enhance the quality and breadth of services available, particularly in areas like digital transformation, data analytics, and AI-driven marketing solutions.

It could equip both companies to navigate better the challenges posed by tech giants like Google and Meta, which have been encroaching on traditional agency business models. 

The merger would likely result in a more consolidated market, with fewer major players controlling a larger share of the advertising landscape. This could mean less competition for big accounts, potentially affecting pricing and innovation. However, it might also lead to better negotiation power with media outlets and platforms.

However, the deal also raises concerns about market concentration and potential regulatory scrutiny from bodies like the FTC and DOJ.

This development comes years after a failed merger attempt between Omnicom and another advertising giant, Publicis Groupe in 2013-14.

The merger will need to address challenges such as conflicts of interest from agencies sharing clients within the same categories and the politically delicate process of determining top leadership roles—a major hurdle in the Publicis-Omnicom merger, with disputes over the CFO position causing delays. 

However, having one dominant partner could streamline decision-making, offering a more practical solution than the unrealistic "merger of equals" concept that led to the failure of the Publicis-Omnicom deal.

In India, IPG is headed by Shashi Sinha and OMG by Kartik Sharma. 

Publicis Groupe, fresh off celebrating its rise to the top with the help of Snoop Dogg in a high-profile campaign, is unlikely to be pleased by the timing of this announcement, which threatens to overshadow its recent triumph just days later.

Recently, Publicis announced that it was on course to overtake WPP and become the world’s largest holding company by the end of 2024.

A merger could also pose new challenges for WPP. The combined entity, with revenues exceeding $20 billion, would surpass WPP's $15 billion and shift industry dominance to the US. 

To maintain its leadership, WPP may also explore strategic partnerships or acquisitions, ensuring it remains agile in an industry undergoing rapid transformation.

Local and midsized agencies may face pressure as the mega-group leverages its scale for aggressive pricing and bundled services that smaller players may struggle to compete with. 

Neither Omnicom nor Interpublic have officially commented on the talks.