Omnicom
A coming mega-merger is set to make waves across the advertising world, especially among the millions of people employed by ad agencies globally.
On Monday, Omnicom announced a $13 billion agreement to acquire fellow US advertising agency business Interpublic Group. The deal would create the world's largest advertising agency holding company.
Industry insiders shared their thoughts with Business Insider on how the merger could impact individual workers at Omnicom and IPG, as well as in the industry at large. They said ad industry workers should expect disruption like job cuts and opportunistic rivals swooping in for concerned clients as the new Omnicom takes shape.
As with many horizontal mergers, job cuts seem inevitable.
Omnicom said Monday the transaction would "generate $750 million in annual cost synergies" as it consolidates its operations with IPG.
Steve Boehler, the founder of marketing and management consulting company Mercer Island Group, predicted in a LinkedIn post that "thousands" of people would lose their jobs.
Job security in the ad agency world has been increasingly hard to come by. Agencies often lay off entire teams when they lose a major client. US advertising, PR, and related services employment fell by 300 jobs to 522,900 in November, despite overall US employment rebounding, according to the Bureau of Labor Statistics.
AI could also negatively impact the advertising job market. The research firm Forrester said last year that the rise of automation could lead to the loss of 32,000 jobs within ad agencies by 2030, about 7.5% of the total worldwide agency workforce.
Merging two companies with 100,000 people, dozens of different agency brands, and hundreds of offices across the globe will not be a simple task.
"It's a massive integration risk," said Martin Sorrell, the executive chair of rival agency S4 Capital, who led WPP for more than 30 years. Sorrell has been an active acquirer of businesses throughout his career.
The companies could also dispose of assets. IPG announced recently that it would sell its digital ad agency Huge to a private equity firm and had said earlier this year it was also looking to offload R/GA, the agency famed for its work for Nike. IPG said the companies would continue to act independently until the deal closes and that during that time they would continue advancing strategic plans that had previously been announced.
Some clients will also have questions, particularly if the combination means their agency is working for one of their direct rivals.
On a call with analysts on Monday, Omnicom CEO John Wren downplayed the threat of client conflicts.
"Are there clients that we have to sit in the coming weeks and months and assure them that we still love them quite as much as we did prior to this morning? Yes." Wren said. "But clients are what drive us every morning when we wake up."
A proposed merger between Omnicom and Publicis Groupe memorably failed in 2014 after the two companies couldn't agree on which executives should hold key positions, such as the CEO role.
Reuters/Shannon Stapleton
While the Omnicom-IPG deal appears more straightforward, there will be some humbling as the company looks to reduce duplicative roles and some execs are looked over for the top roles.
On Monday's call, Wren said he wasn't worried about senior people looking to change their careers as a result of the merger.
Omnicom and IPG executives on Monday talked up the potential for combining their technology platforms, the use of data and analytics, and disciplines like media trading and customer-relationship management.
"Superstar creators and creatives will also be in demand, as well as good strategists, in all disciplines," said Simon Francis, CEO of marketing consultancy Flock Associates. "But, lots of other roles will become diminished."
Jay Wilson, VP and analyst for the research company Gartner, said job candidates looking to strengthen their rΓ©sumΓ©s should consider that high-performing brands are looking for strong performers in areas like business strategy, strategic thinking, and data analysis.
"Advertising and marketing workers certainly need to upskill on Gen-AI skills as well," Wilson said.
As Omnicom and IPG work through the merger, there will be opportunities for rival agencies to pounce.
"Competitors will decide to target you and go through all your clients and your best staff, it's inevitable," a former Publicis Groupe exec said Monday. They spoke on the condition of anonymity to protect career prospects. Their identity is known to BI.
Nimble independent agencies that aren't encumbered with legacy businesses could offer good career opportunities for people who don't want to deal with the complexity of a giant network.
"Certain people will make life or business-style decisions to say, 'God, I don't want to be in this oil tanker and I'd rather jump into a speed boat,'" said a former WPP veteran, who asked not to be named in order to protect their business relationships. Their identity is known to BI.
With fewer big holding companies to choose between, consolidation could drive up prices for clients, which could also present more opportunities for smaller rivals to undercut the incumbents on fees, the WPP veteran added.
Omnicom Group
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.
