Why Omnicom Is Acquiring IPG

A mega merger has been agreed - and it will bring an end to a decades old rumour that American advertising agency networks Omnicom and IPG are destined to combine. A move that will reset the industry scales.

The two companies will continue to operate under the Omnicom name. Combined in 2023 generated revenue of $25.6 billion.

The newly merged company will have over 100,000 employees serving under the ongoing Omnicom CEO and chair, John Wren. Philippe Krakowsky and Daryl Simm will serve as co-presidents and COOs of Omnicom while Krakowsky will also be co-chair of the Integration Committee post-merger.

The merger will bring together various major agency networks including TBWA, IPG Mediabrands, DDB, Weber Shandwick, MullenLowe, FCB, McCann, BBDO, PHD, and OMD among many more potentially spurring a number of mini mergers down the line. According to the announcement, $750 million in annual cost synergies will be created.

Publicis (and even Havas) have rumoured to have flirted with IPG over the years. Should this merger not go ahead due to competition concerns, insiders have suggested that Omnicom would then target IPG Mediabrands as a stand alone deal instead. The view is that IPG is underperforming, and that more value can be squeezed from its assets.

With the continued escalation of Accenture Song and its strengthening within the advertising sector in terms of both offer and experienced execs - the battle between holding companies and consultancy is only set to intensify.

Here are five reasons why this deal could be set to happen now:

• Why now? IPG has lost three of its biggest creative accounts in the last 18 months [General Motors, Amazon and Verizon] so IPG may see this as the right moment ahead of its full financial year being released, negatively impacting share price and sentiment. While it has already begun to break up the group with the sale of Huge and potentially R/GA, it would likely bring in a higher price sold as a whole. This move will certainly create less choice in the market for major advertisers, should it proceed.
  

• Automation will certainly be front of mind here with the value of creative development set to be driven down by the advancement of Gen AI. Consequently, this has heightened talk of media and creativity coming back together as service offers as clients look to review how they pay in a world set to be dominated by AI - IPG Mediabrands and Omnicom Media together will be a powerhouse that might shore up pricing with a huge hold over US media especially. The combination of the two network’s data plays will also offer a heady option for advertisers with OMG boasting Flywheel which was bought from Ascential last year and IPG's Axiom offer.

• Consolidation is usually about one of two things: Scale/cost cutting. This deal would most certainly be more about the former as major advertisers have sought to form top down agency network deals that give them access to the best talent, services and insights from across the business rather than with a plethora of single service agencies. With the scope that a united Omnicom/IPG would have together it could land it some major advertising deals.

• The two US businesses will also find it more straightforward to combine existing practices and data platforms than they would with one of the others headquartered elsewhere; WPP (UK), Dentsu (Japan), Publicis and Havas (France). Culturally, on paper, this seems like the closest fit for both sides although they are very different businesses led by very different chief executives. However, once completed, there would be an immediate efficiency drive to streamline any overlap between the two.
  

• One insider told Creative Salon that Omnicom CEO John Wren has long coveted leading the largest agency network group, especially having been through a failed deal in 2014 to merge with Publicis Groupe where he planned to succeed Maurice Levy. Wren will also be thinking about his legacy as he comes to the end of his long reign over Omnicom which has sat second as in terms of scale for decades. Having put years and millions into the failed merger with Publicis Groupe, stepping down having finally achieved that ambition of creating the largest ad agency network would appeal to him, even if it isn’t likely the driving force behind the whole project.

Ian Whittaker, managing director of Liberty Sky Consultants, shares his initial thoughts on the potential consolidation.

1. I don’t think there will be too much surprise IPG is being sold given both its operational and share price performance and recent sales of agencies. There might be surprise WPP is seemingly not involved (and I suspect it won’t bid);

2. This will be a merger where the upside will be driven more by potential cost savings than extra revenue generation. The wildcard could be if Omnicom highlights IPG’s Acxiom unit as benefiting Omnicom’s Flywheel deal. But overall the benefits will come from cost synergies;

3. It might drive more consolidation speculation or indeed action amongst the medium agency groups such as Dentsu’s international assets and/or Havas. WPP is now in an interesting position;

4. Look out for if/when a deal is announced, if there is anything on the succession plan at Omnicom given John Wren’s long tenure;

5. Don’t assume this deal will get regulatory approval, even though IPG is not strong in media as the Republicans view the advertising industry not as a friend and with the new administration looking as though it will continue, or accelerate, the Joe Biden’s administration’s actions.