In today’s crunched economic scenario, where mergers and acquisitions seem to be the order of the day, a merger adds to the collective strength of a group by providing a definitive punch and taking the advantage of scale to a whole new level. It adds profitability to the bottom line in these times of reduced margins, and boosts investment to keep up with the dynamic changes brought about by technology.
However, industry insiders say that the perceived benefit of the Publicis – Omnicom merger is only in media, the execution of which is not so easy. Theoretically, media buying should become a strength, but in reality, it is a challenge for both the entities, as there will be a client conflict involved.
Another critical aspect is how the combined entity does the buying – transparency in the buying process becomes all the more integral now.
What is the mechanism in place to ensure the holding company is getting a good price, with clients benefitting from that. Clients have to see visible results from the merger, for e.g. if there was a saving of five per cent earlier, is that going to increase to 10 per cent post the merger?
“Mediabrands has just begun to realise its potential now, after the consolidation with IPG. Moreover, when a merger happens, there are usually few casualties and more often, the first casualty are the employees as you cannot please everyone with popular decisions, and some casualties become necessary to ensure profitability,” observed a CEO of a leading media agency, on the condition of anonymity.
Buying is done at a group level for large media agencies, especially for huge cricket properties such as IPL, wherein an overall estimation is taken. This advantage of scale is enjoyed by clients – from a huge FMCG brand to a smaller automobile brand. Industry insiders estimate a good 12 months – 14 months before Publicis Omnicom Group can leverage similar strengths. But they are also pretty clear that the road ahead will be full of challenges. The matching of two distinctly different cultures, salary harmonisation, will the stated saving or profits come on the back of job cuts – are just a few challenges and unanswered questions at the moment.
“Consolidation is easier said than done; the ground reality is different. Logically, my sense is that they will bring the media buying together but there will be a conflict of clients, it is not easy to bring two disparate companies together. Also, how do the media owners accept it, is another aspect. This depends on the previous relationships of the individual companies as well. Cross synergies and getting better rates and volumes are some of the facets that will be looked at,” opined Ashish Bhasin, Chairman India and CEO South East Asia, Aegis Media.
Consolidated buying does come with its own set of challenges. Will Publicis Omnicom Group be able to overcome these challenges and leverage the advantage of scale? What casualties will the merger bring? Only time will tell…