• Omnicom is taking over the Interpublic Group to create the world's largest ad-agency business.
• The deal is expected to generate annual cost savings of $750 million.
• John Wren will remain CEO of Omnicom, while his counterpart Philippe Krakowsky will be co-COO.

Omnicom is taking over Interpublic Group in a deal expected to create the world's biggest advertising and marketing agency business, the US advertising company said on Monday.

The two had been in third and fourth place in the highly competitive ad-agency sector, but a combined entity would eclipse both London-based WPP and France's Publicis in terms of expected revenue and market capitalization.

Advertising industry insiders said the deal underscores the disruption faced by agency holding companies. Agencies face the dilemma of helping clients leverage tech while at the same time risking being displaced by AI and automation.

Industry insiders said the new company's added scale could bring benefits like the leverage to strike better deals with tech and media companies. It could also allow them to combine some offerings and eliminate duplicative roles. However, some industry insiders warned that merging the two companies could be highly disruptive in the short term, which could prompt their rivals to try to poach clients and key staffers.

Investors will receive 0.344 Omnicom shares for each IPG share they own. Omnicom shareholders will own 60.6% of the combined group. The deal is expected to generate annual cost savings of $750 million.

Omnicom was valued at about $20 billion at Friday's close. Its shares fell around 4% in early morning trading after the deal was officially confirmed. IPG was worth $10.9 billion at Friday's close, and its stock jumped by around 12% on Monday morning. The shares of competitor ad companies WPP and Publicis Groupe were also up following the Omnicom-IPG news.

The new Omnicom will have more than 100,000 staffers and offer services across media, precision marketing, customer relationship management, data, digital commerce, advertising, healthcare, public relations, and branding.

"Now is the perfect time to bring together our technologies, capabilities, talent and geographic footprints to bring clients superior, data-driven outcomes," John Wren, Omnicom CEO said in a statement on Monday.

Philippe Krakowsky, IPG's CEO, said the two companies had "highly complementary offerings, geographic presence, and cultures."

Wren will remain CEO of Omnicom, while Krakowsky and current Omnicom COO Daryl Simm will be copresidents and co-COOs of Omnicom. Three members of the IPG board, including Krakowsky, will join the Omnicom board.