The advertising mega-merger announced last July between Publicis Groupe and Omnicom Group is off. Almost a year after the merger was announced, relatively little progress had been made toward blending the two companies. Aimed at creating an ad agency superpower with the reach and capital necessary to compete with Facebook and Google, the deal fell apart late last week.
But how could such a massive, well-planned deal go sour? It could be a case of the potential Omnicom-Publicis Groupe being too big to succeed.
What went wrong?
Tax and regulatory issues are cited as the primary reason for the deal’s collapse, concerns the companies aimed to put to rest just a few weeks ago with a press release from Publicis. Publicis CEO Maurice Levy was prepared to postpone retirement to help lead the new company during its first few years, with Omnicom CEO John Wren committing to five years as chief executive.
But according to a USA Today article, Levy was being pressured to accept a larger management role. And the merger of equals may have also suffered from a potential clash in corporate cultures, management styles and questions of leadership.
Clients come first?
With clients like General Electric, Coca-Cola and Pepsi between them, Omnicom and Publicis faced a potential client clash. And although Wren stated that Omnicom didn’t lose any clients during the negotiation period and there was no competitive intelligence shared, the health of clients may have suffered. “It now appears that management teams put the interests of management teams before their clients,” says Larry Chiagouris, marketing professor at Pace University’s Lubin School of Business.
Managing the scale of a merger this size was sure to be a challenge for both agencies, but it’s difficult to imagine how balancing the needs of clients with messy mechanics of a merger wouldn’t take a toll on client-agency relations.
Bigger isn’t always better
For Omnicom and Publicis, this isn’t the end; it’s possible both companies could pursue mergers or acquisitions with other firms. But for smaller marketing agencies, it’s a cautionary tale in how important it is to maintain a realistic view of scale. Is the loss of a client less important than a potential expansion of reach? Might a play for a bigger audience lead to losing the audience you already have?
Just as important is how the industry views a brand or agency’s ability to take on new challenges. It’s hard to imagine either Omnicom or Publicis suffering too greatly from this latest stumble, but a failed merger could sink a smaller company. Research, planning and audience analysis are critical elements of any campaign, whether it’s taking on a new client or expanding a company. A growing company isn’t healthy if that growth can’t be sustained.
For now, Omnicom and Publicis will most likely regroup and renew focus on serving their clients. Each agency will also probably take more care in future mergers. And smaller agencies can take this as a lesson in how working smarter—not necessarily bigger—is the key to success.