The marriage of two agencies that analysts doubted would work was called off before the wedding. Publicis Groupe and Omnicom Group terminated their $35 billion proposed merger early this morning by mutual agreement.
A battle for control ended their plans for that would have created the world’s largest advertising agency.
In Chicago, the merger would have affected Publicis’ Leo Burnett, Digitas and Starcom MediaVest and Omnicom’s DDB Chicago and Energy BBDO.
The two ad giants had justified the marriage as a way to provide scale and capital to cope with digital technological reshaping the industry.
While Omni CEO John Wren said no one factor killed the deal, a main dispute was over Omnicom wanting the key executive roles – a point Publicis CEO Maurice Levy said he was “not ready to cede” — and the failure to find a way past the strong existing corporate cultures.
Other issues ranged from its complex tax structure to the conglomerates’ divergent cultures. Both sides also were losing major work – more than $1.5 billion in the past month alone – and did not want to let the uncertainty continue.
“There was no clear finish line in sight. Uncertainty is never a good thing when you are I the personal service business,” Wren said.
Two people familiar with the situation said relations between the two companies began to unravel in December when tensions started to develop between Levy and Wren. Levy believed that the deal was turning into a takeover rather than a merger.
With the deal off the table, analysts predicted a period of turmoil ahead for the industry as Publicis and Omnicom seek to re-engage with clients after recent business losses.
One global media-spend consultant told Reuters that he had advised existing Publicis and Omnicom clients to use the uncertainty to negotiate better terms.
He noted that some client work coming up for review in the coming months would also pitch agencies owned by the two firms against each other.
“We see the consequences for the agency space as negative as, shorter-term, it is likely to lead to a more competitive environment and, longer-term, it dashes the hopes that the merger would lead to an easing of pressures in staff costs and client fees,” wrote Liberum analyst Ian Whittaker.