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Publicis - Omnicom merger: The impediments ahead

30-July-2013
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Publicis - Omnicom merger: The impediments ahead

Mergers and consolidations seem to be the order of the day. Post the Aegis-Dentsu merger, the newly formed Publicis Omnicom Group has created waves – and with combined 2012 revenue of $22.7 billion and a combined market capitalisation of $35.1 billion – might we add, for all the right reasons.

In today’s crunched economic scenario, a merger definitely adds to the collective strength of a group. It provides a definitive punch by taking the advantage of scale to a whole new level, adding profitability to the bottomlines in these times of reduced margins, and boosting investment to keep up with the dynamic changes brought about by technology.

‘Client conflict’ has been another buzzword related to this merger, with Coca-Cola and Pepsi, and Verizon, T mobiles, AT&T and Sprint – now all under the same holding company. How the merger pans out in this aspect, specifically when it comes to India, is something we look forward to.  

“How you manage client and client conflict, especially in a country like India, which is many countries rolled into one given the complexities of the market, is critical,” said Ashish Bhasin, Chairman India and CEO South East Asia, Aegis Group.

At the press conference that took place on Sunday to announce this merger, the Co-CEOs – Omnicom CEO John Wren and Publicis Groupe CEO Maurice Lévy – assured all present that there would no difficulties in terms of clients concerns.

Bhasin also emphasised on the importance of how things are handled post the merger. Undoubtedly, lot of synergies, specialisations, expertise, and the advantage of scale can be availed, but significant challenges lay ahead, he stated.

“The merger surely adds more mettle to the new combination, which will strengthen their leverage on media. However, this will increase the need for transparency even more, when it comes to internal as well as external clients. On the conflict front, as long as agencies are capable of convincing the clients about Chinese walls, this is no longer a conflict,” shared Pradeep Iyengar, President Indian Operations, EMM.

Whilst speculation is rife on the possibility of clients being poached by rival agencies due instability caused by the merger, there is no doubt that a merger of this scale brings benefits in terms of enhanced power of scale, which is a precious tool in the media business today. If the newly formed ‘Publicis Omnicom Group’ was to use this power in negotiation and consolidated buying, it is bound to impact other networks as well. 

The other critical aspect of the merger is the strength of more than 130,000 employees. Handling the human quotient becomes even more important now.

“Talent management can also be an issue. The media business is one that is run by people, not machines in factories, and this can be a huge management challenge. If not handled well, the whole can become smaller than sum of the parts. It is extremely important to retain key people or the whole exercise can become counter-productive,” observed Bhasin, stressing on the importance of talent retention post the merger.  

It will be quite interesting to see how this marriage of ‘equals’ – all set to give other networks a run for their money – works out in the times to come.

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