Last checked at * Shares in WPP, Interpublic, Havas leap on deal news * Competing agencies will seek to poach big advertisers * Conflicts possible in tech, telecom, autos * Publicis, Omnicom say can manage conflict risks (Adds comment from Interpublic) By Kate Holton and Leila Abboud LONDON/PARIS, July 29 (Reuters) - A plan to merge Publicis and Omnicom into the world's biggestadvertising group has rivals ready to poach their blue-chipclients that might leave the new agency as it faces potentialconflicts of interest. Without any defections, the Franco-U.S. giant would bringthe accounts of major competitors in a number of industries suchas Apple Inc and Samsung Electronics Co Ltd, or Coca Cola Co Ltd and PepsiCo,under one roof. Publicis Chief Executive Maurice Levy and his Omnicomcounterpart, John Wren, spoke to some of their biggest clientsbefore the $35.1 billion deal was announced on Sunday, industrysources said. The CEOs said they made further calls on Monday toreassure them they would be better served by the new group. But rival CEOs from London to Paris and New York, includingWPP boss Martin Sorrell, were already scouting on Mondayfor accounts to poach from the soon to be formed group,industries sources said. Under the deal, the French and U.S. groups will form anadvertising giant with the scale and investment firepower tobetter cope with rapid changes brought by technology on thebusiness. Rival ad groups have a rare opportunity to swoop up clientsas contracts between major advertisers and agencies ofteninclude clauses that say they can be renegotiated in the case ofagencies being bought or sold. "It's good for us and other independents," said DavidKershaw, CEO of ad group M&C Saatchi. "It shakes outmore people that want great creative and global capability butthey don't want to be involved with one of these behemoths, andalso who feel uncomfortable having their competitors within thesame group," he told Reuters. The merger will bring together Publicis brands such asSaatchi & Saatchi and Omnicom's BBDO Worldwide and DBBWorldwide, which could create new client clashes. Levy and Wren said they did not expect any major problemswith big advertisers defecting to rivals, with the Frenchmandescribing the reaction from clients as "extremely positive". "We're going to work extremely hard to resolve any clientconflict issues with creative solutions," said Wren, adding thathe expected only a roughly 1 percent revenue decline due topotential contract losses. Shares in rival ad groups leapt on Monday, in a sign oftheir perceived opportunity and prospects for furtherconsolidation in the industry. Shares in WPP, the world's biggest ad agency, opened up over4 percent before paring gains to 0.6 percent at the Londonclose. Interpublic was up 8 percent on the New Yorkstock exchange while France's Havas rose 5 percent. "The deal should boost competitors' stock prices in the nearterm, with billions of overlapping business up for grabs and theindustry consolidation story now having a greater sense ofurgency," said Steve Soranno, an equity analyst at U.S.-basedfirm Calvert Investment Management. It has $13 billion undermanagement, including shares in Omnicom. CEO Michael Roth of competing agency Interpublic said majoracquisitions are not needed to maintain business growth."There's nothing about scale that makes for better creativeideas, or leads to better integration of marketing disciplines,"Roth said in a statement emailed to Reuters. MASSIVE SWINGS Don Elgie, CEO of the insight and digital communicationsgroup Creston, said he expected a fall-out from the tie-up. "Communications groups are nothing without their clients,"he said. "You could see massive swings in terms of clientsmoving around. "They can't have talked to all their clients (and also) noclient is going to give a cast iron reassurance until they seehow the thing shakes out." Three senior European advertising executives interviewed byReuters said areas of conflict within the new company couldinclude the consumer goods, tech and automobile sectors. For example, Omnicom works for PepsiCo and Publicis handlesCoca Cola. In telecoms, Omnicom handles U.S. leader AT&T and Publicis its rival Verizon. Technology blue-chips are also an issue: Omnicom works forApple and Microsoft Corp, Publicis for Samsung andGoogle Inc. BMW sales chief Ian Robertson said he had some concerns. "We may be affected in some way in some country but it's tooearly to say," he told Reuters. "Ideally, clearly we (would)have that independence from other manufacturers. But in a worldwhich is now connected and there are so many mergers of thistype, maybe that's something that is not an ideal position." Renault and Nissan were among the first big advertisers towelcome the deal. "Renault and Nissan are both major global clients of bothPublicis and Omnicom. We welcome the direction taken by Publicisand Omnicom to create a best-in-class communications,advertising, marketing and digital services company and willcontinue to work with them," a Nissan spokesman in Britain said. As the two ad groups begin a round of meetings withshareholders, the one area they are likely to focus on is theadvantage they will get in negotiating the pricing for ads withthe tech giants of Facebook Inc or Google, and investingin new software and data mining tools. "Consolidation may help regain pricing power in a verycompetitive industry," Morgan Stanley analysts wrote. (Additional reporting by Rhys Jones and Paul Sandle in London,Andreas Cremer in Frankfurt, Liana Baker in New York and SruthiRamakrishnan in Bangalore; Editing by David Stamp and RichardChang)
23 Feb 2023 10:34
