“I hate to say, I told you so,” said WPP’s CEO Sir Martin Sorrell, who had reiterated various issues that the Omnicom and Publicis USD 35 billion merger had been facing. While speculations have been rife for a while, Publicis and Omnicom announced earlier today that they were calling off conversations of what was dubbed as a megamerger.
The industry at large is still surprised with the development, Asia Pacific in particular, given that most of the merger conversations were held too close to the corporate offices of the two ad holding companies in New York and France. In fact, in a poll conducted with DMA readers last week on the subject, 84 per cent had responded saying that delays were part of a big deal but no reason for the merger conversation to fall through.
The time that the merger was taking was cited as one of the reasons for the termination of the conversation. An analyst commented, “This had become a talking point for both the companies. There was lack of certainty on the way forward and it would hurt the businesses of the two companies.”
In a conversation with DMA, Mr Sorrell said, “For us, the announcement of the termination of the merger is not a surprise at all. We had thought the conversations would at least continue till July, which was when the merger agreement would lapse unless both sides would have agreed to continue. So the surprise is only the speed in which the talks have failed. Both companies had stated that even without the merger, they would be equally good which leads to the question why was it then that they were moving forward with the merger in the first place.”
According to the WPP Chief, the megamerger that would have created the world’s largest ad holding company and in effect would have replaced WPP from that position, was driven more by “ego and emotional decisions” than strategic and structural approach.
Officials from both companies had spoken to stakeholders and clients of the benefits that this would bring. At the same time, companies such as WPP claimed that the merger drove some of the businesses to look out of Omnicom and Publicis and move to WPP companies.
When the merger was first announced, some industry wide observations also were around the consolidation and balance that the merger proposed to bring to the business. For Mr Sorrell however, the takeaway from the Publicis Omnicom Group experience is to first “think through” a move. “This reflects how misjudged the decision was in the first place. Deals such as these do not happen by a few people. They have to include what they call the expensive advisers — lawyers, tax advisers, investment bankers — it cannot be rushed,” Mr Sorrell commented.
Despite attaining regulatory approvals in most markets, countries such as China were still scrutinising the deal. Issues such as domicile, power positions, Executive offices apart from tax related issues also surfaced in the last few months.