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Strategic clarity trumps scale anyday: Experts on POG's failed merger

Strategic clarity trumps scale anyday: Experts on POG's failed merger

Author | Priyanka Mehra | Monday, May 12,2014 8:50 AM

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Strategic clarity trumps scale anyday: Experts on POG's failed merger

Publicis Groupe and Omnicom Group called off their $35 billion merger deal last week, a little over nine months after announcing plans to team up in what was termed as “merger of equals” and the biggest merger of 2013. Publicis Groupe and Omnicom have said that the decision to call off the deal was mutual, following “difficulties in completing the transaction within a reasonable timeframe”.

There have been several reactions to the breakdown of this deal. exchange4media asks some leading advertising honchos what do they think led to the failure of this marriage of ‘two equals’.

Clients and employees were not at the core
“I am not privy to any special information, but I guess the decision was probably a hurried one, for the sake of scale and all issues concerning people and clients that would arise were not thought through in great detail,” opined Sam Balsara, Chairman and Managing Director, Madison World.

Rohit Ohri, Chairman, Dentsu India & CEO, Dentsu Asia Pacific South remarked, “A clear vision and an added value proposition for clients are needed to drive a large merger like this. I think that’s where POG fell short.”

Media leaders across the industry believe that the two critical success factors in a merger are perceived value addition (or lack thereof), as seen by the clients and as seen by the employees. Every other factor comes later.

“A good merger cannot be based on a desire for size, it has to be for client and people,” said Ashish Bhasin, Chairman & CEO - South Asia, Dentsu Aegis Network, while emphasising on the importance of clients and employees being at the centre of all decision making.

Impact on media industry... WPP continues to reign
A merger of this scale undoubtedly brings benefits in terms of enhanced power of scale, which is a precious tool in the media business today. If the Publicis-Omnicom Group (POG) was to use this power for negotiation in consolidated buying, other networks would be impacted as well.

“Both the networks have spent so much in the backend, working towards the merger, in planning and bringing both the networks together. It is also a wasted opportunity to leverage media resources and the strength of scale,” observed Bhasin.

The POG merger had to also overcome the challenge of two different nations and cultures coming together, which is no mean feat. In addition to this, consolidated buying comes with its own set of challenges.

Balsara felt that people will be more careful in future before announcing mergers. He added that WPP continues to reign.

Learnings for the industry
The importance of good strategy in a merger of this scale cannot be undermined, felt Ohri, adding, “The big learning for the industry from this failed merger is that strategic clarity trumps scale anyday.”

Given that mergers are fast becoming a norm, it is vital not to get carried away by the size of the corporations or the size of the deals, feel industry leaders.

Echoing this sentiment, Bhasin said, “In a service industry, clients need to come before chasing size and bottomline.”

Organisations opting for a merger need to start asking what value will it add to the talent and what value will it add to the clients in the long run.

“The major learnings are that irrespective of size, agencies are about people and clients, and if you forget that, you are in trouble. Most other corporations operating in other sectors don’t have this problem,” concluded Balsara.
 

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