Omnicom Group, one of the world’s largest advertising agencies, announced that it will buy rival Interpublic in an all-stock deal. The merger will create the biggest ad agency in the world, with a combined annual revenue of almost $26 billion. The agreement needs the approval of Omnicom and Interpublic shareholders.
It could attract regulatory scrutiny as it seeks to merge the world’s third-largest ad buyer, Omnicom, with the fourth-largest, Interpublic. John Wren, chairman and CEO of Omnicom, said, “Through this combination, we are poised to accelerate innovation and harness the significant opportunities created by new technologies in this era of exponential change. Now is the perfect time to combine our technologies, capabilities, talent, and geographic footprints to bring clients superior, data-driven outcomes.”
The combined company will keep the Omnicom name and trade under the “OMC” ticker symbol on the New York Stock Exchange.
Shareholders of Interpublic will receive 0.344 Omnicom shares for each share of Interpublic common stock that they own. Omnicom shareholders will own 60.6 percent of the combined company, and Interpublic shareholders will own 39.4 percent after the transaction is complete. Tech giants such as Google and Amazon have, in recent years, attracted marketing dollars away from traditional agencies by offering both advertising tools and marketplaces to buy and sell them.
Omnicom and Interpublic shareholder’s approval
The soaring use of AI tools that allow businesses to create ads cheaper and faster has squeezed traditional agencies, forcing them to scramble to develop similar in-house tools to retain clients. Wren said the size of the new marketing giant will have multiple advantages, including the use of new technologies like artificial intelligence.
Omnicom executives highlighted their “clearly identified opportunities” for $750 million in annual cost savings. Industry experts agree that consolidation among the new holding company’s creative networks will be inevitable. The creative agency brands across Omnicom and IPG include The Martin Agency, TBWA, McCann, FCB, BBDO, DDB, and Deutsch.
Greg Paull, CEO and Principal at R3 said operating six global creative brands seems unlikely. As seen at WPP and elsewhere, some consolidation would be expected.
The deal is expected to close during the second half of next year. Regulatory roadblocks had forced Omnicom and France’s Publicis Groupe SA to call off their $35 billion merger in 2013.
Shares of Interpublic jumped 10 percent Monday, while Omnicom’s stock fell more than 6 percent.
