Omnicom and Publicis have given up on their merger dream.
Last July the bosses of the US and French companies unveiled a deal that would have created the world’s largest advertising agency.
Now they have admitted that there are too many problems in bringing the rivals together.
The collapse is because of issues ranging from its complex tax structure to the firms’ divergent cultures.
Commentator John Foley with Reuter’s Breakingviews has been following the saga: “These two companies should, on paper, have made the perfect merger. They’re both roughly the same size, they’re both in the same business so there are cost savings of about $500 million a year. And the chief executives saw eye-to-eye, they drew this whole thing up, but what they didn’t do is think through the people issues – who’s going to take what job, what will the clients think, what will regulators think and what will the tax man think. And on those grounds the deal eventually fell apart.”
It was supposed to be a merger of equals that would enable better competition in the digital age with the top dog – Britain’s WPP.
News of the collapse caused WPP’s shares to rise slightly as it keeps its crown as the world’s largest agency now that its rivals are staying independent.
Publicis said one reason they had given up was Omnicom wanted to hold too many of the merged firm’s top jobs.
The French agency’s CEO Maurice Levy did not feel that was balanced: “Omnicom wanted their people to fill the CEO, CFO and general counsel jobs. I thought that went too far. I thought Publicis needed to fill the CFO job to preserve the equilibrium and ensure that our business model continued.”
Omnicom CEO John Wren said the two sides had failed to find a way past the strong corporate cultures that existed in each company.
The delays and uncertainty meant both were losing major clients – reportedly over one billion euros worth in the past month alone. However Wren disputed that Omnicom lost clients because of the merger, saying it was “absolutely not true”.
Neither company will pay a termination fee, and they will split the costs of the failed deal, such as legal fees.