(Adds details, analysts quotes)
LONDON, July 29 (Reuters) - Shares in advertising groupsjumped on Monday after Publicis and Omnicom said they would merge, as investors bet the deal would create anopening for rivals to poach defecting clients and potentiallytrigger more deals.
The French and U.S groups will overtake current industryleader WPP to form a $35.1 billion industry giant in abet that agencies will need scale to invest in software and dataanalytics to keep up changes to the advertising business wroughtby the Internet.
WPP was trading up 1.7 percent at 1005 GMT, while smalleragency Havas was up 6 percent. Publicis is due tostart trading later in the day.
Analysts at Morgan Stanley said the new Publicis Omnicomgroup would be a stronger counterpart to digital giants likeFacebook or Google, when it comes to negotiatingthe pricing for ads and investing in new software and dataanalytics.
"Consolidation may help regain pricing power in a verycompetitive industry."
Other groups could now do deals to stop falling into the gapbetween the behemoths such as the new Publicis Omnicom and WPPand the smaller creative independents, industry experts said.
U.S. group Interpublic, France's Havas andDentsu, the Japanese group that bought Britain's Aegisa year ago, could all be involved in a new round ofconsolidation.
WPP, which has focused on buying agencies in the digitalsector and in emerging markets in recent years, could alsotrigger bigger deals.
CLIENT CLASHES
Bringing together Publicis brands such as Saatchi & Saatchiand Omnicom's BBDO Worldwide and DBB Worldwide will create newclient clashes, analysts said, and rivals will waste no time inpitching for more business.
Publicis represents Coca-Cola, while Omnicom has Pepsi-Cola,for example, and between them they have all the major Germanauto companies.
French car maker Renault, which has been a clientof Publicis for 50 years, uses the agency for both creativeadvice and to buy TV, web, and print ad space on its behalf. Itwill have to decide whether to modify that relationship nowsince its strategic partner Japan's Nissan works withOmnicom.
A spokeswoman for Renault said the group would make nocomment until the Publicis-Omnicom deal closed.
Publicis and Omnicom management played down the risk ofclient defections, saying the overlap was minimal and theyalready operate with strict firewalls between their hundreds ofagencies to prevent conflicts.
"Both of us have long experience of having separate brands,different operations, with Chinese walls between them, saidPublicis CEO Maurice Levy at a press conference on Sunday.
"We think we can build solutions on this issue for ourcustomers."
Nonetheless, some clients will take the opportunity toreview accounts, particularly if they hadn't been briefed on thedeal. Contracts between major advertisers and agencies sometimesinclude clauses that say they can be renegotiated in the case ofmajor M&A deals that pose new conflict issues.
Julien Roch, analyst from Barclays, told Reuters the dealwas actually good for the entire sector.
"Publicis and Omnicom get the synergies, while WPP, Havasand others can pick up bits of business from big customersreviewing contracts in light of the deal," he said. (Reporting by Kate Holton and Leila Abboud; Writing by PaulSandle; Editing by Giles Elgood)