Omnicom initiates US$13bn deal to acquire IPG: Was the writing on the wall?

Omnicom has initiated a US$13.25 billion all stock deal to acquire Interpublic Group. The combined company will bring together the industry’s deepest bench of marketing talent, and the broadest and most innovative services and products, driven by the most advanced sales and marketing platform.  

Together, the companies will expand their capacity to create comprehensive full-funnel solutions that deliver better outcomes for the world’s most sophisticated clients. 

Upon the acquisition, the new Omnicom will have over 100,000 expert practitioners. The company will deliver end-to-end services across media, precision marketing, CRM, data, digital commerce, advertising, healthcare, public relations and branding. 

Furthermore, John Wren (pictured left) will remain chairman and CEO of Omnicom, whereas Phil Angelastro will remain EVP and CFO of Omnicom. Philippe Krakowsky (pictured right) and Daryl Simm will serve as co-presidents and COOs of Omnicom.  

“This strategic acquisition creates significant value for both sets of shareholders by combining world-class, highly complementary data and technology platforms enabling new offerings to better serve our clients and drive growth,” said Wren.  

“Through this combination, we are poised to accelerate innovation and harness the significant opportunities created by new technologies in this era of exponential change. Now is the perfect time to bring together our technologies, capabilities, talent and geographic footprints to bring clients superior, data-driven outcomes. We are excited to welcome Philippe and the entire Interpublic team to the Omnicom family,” Wren added. 

“Our two companies have highly complementary offerings, geographic presence and cultures. We also share a foundational belief in the power of ideas, enabled by technology and data. By joining Omnicom, we are creating a uniquely comprehensive portfolio of services that will make us the most powerful marketing and sales partner in a world that’s changing at speed. We look forward to working with John and the entire Omnicom team,” Krakowsky added. 

What would it mean for the marketing industry?

Calling it a move that would reshape the industry, Forrester VP, principal analyst Jay Pattisall commented the acquisition will accelerate the role of technology and AI in marketing delivery and setting the industry on a path toward a hybrid services and SaaS model.

“The aggregation of resources will accelerate Omnicom and the industries march to AI as a foundational element of marketing creation and production. The components are all there, Flywheel, Acxiom and the Omni marketing operating system,” he added.

“Principal media will continue to be commonplace and slightly grow with Mediabrands/Magna billings being able to take advantage of Omnicom principal media solutions,” he said.

Goh Shufen, principal consultant at R3 said that while Omnicom and IPG have always been giants in the US, the performance in Asia has been less consistent. Hence the move will certainly ruffle some uncertainty amongst the struggling entities in Asia.

“Marketers care about whether their commercial promises will be delivered and if the talent on the business get impacted as part of the integration. Whilst the intention is to achieve efficiency through greater adoption of tech like Gen AI, the messiness that comes with getting humans to work together may get in the way of delivering that promise in the next 12 to 18 months,” she added.

Industry perspectives out of Asia

For those of us in the advertising industry long enough, we'd recall that this is not the first time Omnicom has been involved in a high stake conversation around acquisitions and mergers.

In 2014, Publicis Groupe and Omnicom were in talks of creating the industry’s largest holding company - a snub to then giant WPP. However, the move ultimately didn’t go through given the move was more to drive scale than efficiency. Unlike talks of the merger though, this time around the acquisition of IPG makes the definitive efficiency-led lines far more clearer, say industry players.

According to Jeffrey Seah, general partner at Temasek-backed MSW Ventures, and former chairman of Starcom who spent over 26 years leading some of the biggest advertising agencies in the holding companies, the merger was not unexpected. “Holding companies have all been doing similar things in different ways without much variation in results,” he said, adding:

Nonetheless, it feels like a Jurassic Park moment in advertising history.

Seah also commented that Omnicom has dabbled going fully into data and e-commerce, but unfortunately is held back by its traditional creative offering.

IPG on the other hand, he added, has “been in a slumber watching what the others are doing - staying away from what did not work”, yet not willing to take the transgressions into known areas of difference.

“So it is a merger of fated convenience - not feted attraction - to stay current and remain on the invitation list for client pitch cocktails,” he said.

Echoing Seah’s sentiments, Ranganathan Somanathan who was formerly the CEO of Omnicom Media Group in Singapore and Malaysia said the merger was imminent, but what remains to be seen is the outcome for employees and clients.

Expectedly, there is bound to be a massive efficiency drive, resulting in shutting down of brands and seeing redundancies. Most importantly, there will be a strong need to evaluate the synergies to tap into and create incremental value for the stakeholders quickly.

Additional details of the deal

Under the terms of the agreement, Interpublic shareholders will receive 0.344 Omnicom shares for each share of Interpublic common stock they own. Following the close of the transaction, Omnicom shareholders will own 60.6% of the combined company and Interpublic shareholders will own 39.4%, on a fully diluted basis. The transaction is expected to generate annual cost synergies of US$750 million. 

Krakowsky will also be co-chair of the Integration Committee post-merger. Three current members of the Interpublic Board of Directors, including Krakowsky, will be welcomed to the Omnicom Board of Directors. 

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Omnicom in advanced talks to buy Interpublic Group