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Sir Martin Sorrell on the reasons why POG collapsed

Sir Martin Sorrell on the reasons why POG collapsed

Author | Priyanka Mehra | Monday, May 12,2014 9:33 AM

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Sir Martin Sorrell on the reasons why POG collapsed

The collapse of the $35 billion merger deal between Publicis Groupe and Omnicom Group, announced last week, has elicited sharp reactions from the advertising industry around the world.

As is known, the deal has been called off a little over nine months after Publicis and Omnicom announced plans to team up in what was termed as “merger of equals”.

Publicis Groupe and Omnicom said that the decision to call off the deal was mutual, following “difficulties in completing the transaction within a reasonable timeframe”. Both the parties have released each other from all obligations with respect to the proposed transaction, and no termination fees will be payable by either party.

The failure of the mega marriage vindicates what Sir Martin Sorrell had predicted last year, when he termed it as ‘POG’ and called it “a merger of unequals”.

In July last year, Paris-based Publicis and New York-based Omnicom came together, in a  gigantic move that was perceived by the media industry as an attempt to become number one , a place occupied by WPP. Sir Martin unhesitatingly remained unaffected and cited reasons why the merger would fail at the exchange4media Conclave last September.

Confused Leadership?
These seemed to be a lack of clarity in leadership to begin with, felt Sir Martin. Questions like – Who will be the new CEO? How can the Co-CEO structure be maintained? How will the dual-management structure function? – remained unanswered.

The merger was not merely of two networks, but two disparate nations and cultures. Could Maurice Lévy, a French man and CEO of Publicis, work in harmony with American John D Wren, CEO of Omnicom Group. The personalities of the new Co-CEOs were indeed very different. “The organisational structure, where there is a co-chairman or rotating chairman, won’t last,” Sir Martin had predicted.

Ambiguity in the location of the new CEO
Since the Omnicom Group is an American global advertising, marketing and corporate communications holding company, headquartered in New York City, while Publicis Groupe is a French multinational advertising and public relations company, headquartered in Paris, where would the headquarters ultimately be? Would this mean that the French iconic company is being handed over to the Americans or is it the other way round, asked Sir Martin.

Would the all important clients and employees be happy with this marriage?
According to the WPP Chief, clients and employees have not been articulated the benefits. There was a vacuum in explaining the deal to internal and external customers.

This seems like a classic case of ‘I told you so’, but did Sir Martin expect the merger to be called off so soon?

“We thought that it would at least last till July, but the pressures were so intense. They were losing clients and people, the strategy was not thought through well, as predicted, there were people and client issues. Both companies have been saying they are both independently strong, which brings us to the question of ‘why bother to come together at all?’ The way things have panned out must have cost them over a $100 million, it reflects on the quality of decision making,” he observed, speaking to exchange4media exclusively post the announcement of the failure of POG.

In the meanwhile, WPP has by no means lost any time and has accelerated its targets in fast growth markets from 40 per cent to 45 per cent, simultaneously keeping a steady momentum small- and medium-sized deals. “A merger cannot take place for emotional or egotistical reasons, strategic rationale, good planning and execution are must, and your eyes are not bigger than your tummy,” concluded Sir Martin on the learnings from the failure of POG.

No guesses on who is having the last laugh on the failure of this mega marriage.
 

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