Omnicom-Publicis Merger- What’s next in M&A?

By Rick Gould, CPA, JD

The Global marketing communications industry was forever altered by the news that U.S. based Omnicom and Paris based Publicis Group will be merging in the coming months.   The media called this a “merger of equals,” creating a market valuation of $35 billion.  Publicis chairman Maurice Levy and Omnicom Chairman John Wren will serve as Co-CEO’s each at the helm for a 30 month period.

I ask if joining two of the largest holding companies increases valuation?  This was a merger that will combat the two big competitors, in digital and emerging markets- Google and Facebook, as well as rival WPP. This could be indicative of what’s to come in the industry.

There have been many recent quality deals in the PR M&A space.

·         Finn Partners acquiring Widmeyer Communications & M. Silver Associates, both SGP facilitated transactions that we believe will be win-win for buyer and sellers.

·         Padilla Spear and CRT/Tanaka merging their firms

·         London based Lewis acquiring Davies in Boston

·         And now Omnicom and Publicis Group doing the merger

We believe there will be several additional transactions by end of year.  I suspect WPP will be reacting to this transaction in the near future with a major acquisition.  CEO Martin Sorrell is a master dealmaker and will not like being #2.

What this shows is that even the giant holding companies acknowledge that they are lacking in certain highly specialized areas- such as the digital area, the growing Asian and Latin American markets, like China and Brazil and top talent that can help grow these sectors.

·         It will allow pricing power

·         It will allow intellectual capital

·         It will allow size and growth and cross-referring

So what does this mean for the PR industry and potential buyers and sellers of firms?

·         Strategic acquisitions will continue as buyers realize they have a need for certain niche specialties.

·         Many one office firms will acquire in locations that will facilitate and improve client service.

·         Firms are realizing that “bigger” is usually “better”.  That with size there are economies of scale and these economies go straight to the bottom line.

Buyers believe they can improve the operations and profitability of firms they acquire once the inefficiencies of integration no longer exist.  Their bottom-line will then improve and down the road they will exponentially increase the value of their firm. 

Sellers want to sell to larger, more prestigious firms

·         They are losing pitches that they would have won if bigger.

·         They are of the age where the timing to sell is right.  Many are of the boomer generation in their 50’s, 60’s, 70’s.

·         They realize having the financial resources and intellectual capital of the buyer firm is a huge advantage in winning and retaining clients.

The Omnicom- Publicis merger is a signal that the M&A arena in PR is active and will only increase in the future months.