The recent merger of Omnicom and Publicis Groupe has brought into focus the M&A effect in the world of advertising and media. Loads has been written about whether it’s a good deal or bad, whether it was done to spite WPP, whether it’s just an ego game, etc.
Undoubtedly, many more newspaper columns will be devoted to analysing the financial aspects, good and bad. And then the news worthiness will die, and so will its relevance to most. However, that’s when the real test begins.
To my mind, the success and failure of any merger in our industry, not specifically the current one, depends little on the cost savings or the amount that was paid or the terms of the deal. Those are all important, but not vital issues. The two critical success factors are perceived value addition (or lack thereof) as seen by the clients and as seen by the employees. Every other factor is subservient to these.
Even if it’s a great deal, ‘a steal’ in monetary terms, it’s worth little or nothing if your best talent is either going to walk out or be demotivated or hanging around but confused. With best of intentions, large mergers in service industries can leave people wondering as to where they stand. When any merger is announced, every employee will first try to work out what it means for them. Will I be better off or worse after this merger? It’s not only about money; it’s about the culture, vibe, vision, chemistry and the perception of what the future holds in store.
Likewise, every client will first see how it affects him or her. Will it make him less important to the new group? Are they in bed with the competitors? Will the talent on his business change? Will he benefit from the new synergies? How will it pan out in the years to come? These are all natural anxieties any client would nurse and all of them have several options open at anytime and can show their displeasure by walking out.
For exactly these reasons, the real work begins post the merger, post the honeymoon period. The dust would’ve settled, but the realities then hit home hard. To my mind, that’s when the success and failure of a merger comes to test.
So if anyone asks you whether any merger is a good deal or a bad one, your answer should be that it can be either. And whether the deal is good or bad is very different from whether the price paid for it is good or bad, because it is most dependent on how the post merger scenario is handled vis-à-vis the talent and clients. If handled well, it is a good deal. If handled poorly, it is a bad deal, irrespective of the price paid. So my reply is that come back to me after a year, and the answer will be clear to you.
Given that mergers will now be the norm, I hope people start applying this litmus test and not get carried away by the size of the corporations or the size of the deals. I hope they start asking what value will it add to the talent and what value will it add to the clients in the long run.
Ashish Bhasin is Chairman India and CEO South East Asia, Aegis Media