French, American Ad Giants to Merge

Maurice Lévy, current CEO of Publicis Groupe, will stand down after 30 months as co-CEO of newly formed Publicis-Omnicom Group. Photo: Guillaume Paumier for Wikimedia Commons.

Maurice Lévy, current CEO of Publicis Groupe, will stand down after 30 months as co-CEO of newly formed Publicis-Omnicom Group. Photo: Guillaume Paumier for Wikimedia Commons.

The merger of French and American agencies Publicis Groupe and Omnicom Group will create the largest advertising firm in the world, with a combined 35.6% of market share. The move, confirmed on Sunday but long rumored, represents an enormous change in the marketing business, and has provoked intense reactions from all areas of the industry, as well as from investors and financiers.

Paris based Publicis Groupe, headed by Maurice Lévy, currently holds 28.1% of worldwide market share, boasting brands such as Saatchi & Saatchi. Publicis took in a revenue of $8.8 billion in 2012.

Lévy and his US counterpart, John Wren, are to continue as co-CEOs for 30 months, after which Lévy will step down and become a non-executive chairman, and Wren will continue as CEO, a press-release issued by both companies said.

The move means that the current largest advertising agency, London-based WPP, will become second largest. CEO Sir Martin Sorrell told British newspaper The Independent that he expected a “wave of client defections” after the merger, as many clients suddenly found themselves using the same firm as their direct competitors.

In the wake of these comments, WPP’s shares rose 2% on Monday, the first day of trading since the announcement, whilst those of other agencies also rose. Havas SA, a French company, saw a 4.7% rise, while Interpublic Group of Companies Inc. in New York saw one of 4.4%.

Companies who are expected to create conflicts of interest with competitors include both Google and Microsoft, and Coca-Cola and Pepsi. Addressing these concerns, Wren is reported as saying that he did expect difficulties, but is thought to have plans to ban teams from communicating with what he termed a “Chinese wall.”

The merger is seen as a response to the increasing value of companies such as Facebook and Google in online marketing. Lévy addressed the issue in a statement, noting that the “exponential development of new media giants, the explosion of Big Data” has “created both great challenges and tremendous opportunities for clients.”

The deal, which will create a new company called Publicis-Omnicom Group, is thought to bring with it $500 million in savings, but has also brought competition concerns, as the huge worldwide merger will have to survive antitrust clearance in 45 different countries.

The deal will mean that Publicis-Omnicom Group will hold 40% of the TV buying market in the US alone, and will boast a staff of 130,000.

In order to maintain secrecy during the negotiations of the so-called “merger of equals,” the French and American giants were given pseudonyms of “Purple” and “Orange.”

The deal is expected to be completed by late 2013 or early 2014.

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  1. […] merger of French and American agencies Publicis Groupe and Omnicom Group will create the largest advertising firm in the world, with a combined 35.6% of market share. Paris […]

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