In a word, yes — which could make them much more formidable when they approach TV networks to negotiate ad rates. Up to now agencies have had mixed thoughts about mergers. The financial advantages, including the ability to cut costs, often are outweighed by the need after a deal to jettison big clients who compete with each other. In Omnicom Group’s new merger agreement with Pubicis Groupe — officially announced this morning following widespread reports about it this weekend — the combined entity might have to pick between Coke and Pepsi, AT&T and Verizon, Nissan and Toyota, and Google and Microsoft. But arguments in favor of mergers become much more compelling if antitrust officials in the U.S. and Europe approve the creation of Publicis Omnicom Group. (The companies call it a merger of equals that should close by the end of Q1 2014.) Last year the two companies together generated $11.4B in revenues from the U.S., more than twice as much as WPP which would become the No. 2 agency. The merger would make Publicis Omnicom a compelling choice for blue chip advertisers, in part because it likely would have the best technologies and resources to track how ads are performing over multiple media. Others will have to respond by making their own merger deals says Pivotal Research Group analyst Brian Wieser. Interpublic “will immediately be considered to be in play,” he says as he raised his stock price target for the ad company to $21 from $16. Currently the No. 4 agency worldwide behind WPP, Omnicom and Publicis, Interpublic offers “the best solution” for WPP, Havas and Dentsu as they look for options.
The calculations could change if antitrust officials reject the Publicis Omnicom plan. The companies likely will argue that they’re data companies up against the likes of Google and IBM, not just advertisers. “The communication and marketing landscape has undergone dramatic changes in recent years including the exponential development of new media giants, the explosion of Big Data, blurring of the roles of all players and profound changes in consumer behavior,” says Publicis CEO Maurice Lévy. “This evolution has created both great challenges and tremendous opportunities for clients. John and I have conceived this merger to benefit our clients by bringing together the most comprehensive offering of analog and digital services. Equally important, it will offer our talented people new avenues for growth and success at the crossroads of strategic intelligence, creativity, science and technology.”