Merger may put pressure on prices

Advertising conglomerates Publicis and Omnicom rocked the industry this week with news that they are planning a $35 billion (€26.5 billion) merger.

What will the proposed merger mean for the Irish operations of both companies and other Irish firms in the advertising business?

Publicis Dublin managing director Pádraig Burns said he was doubtful the merger would have any immediate impact on the company’s Irish operations.

“We have a very good relationship with the Publicis network, albeit they are a minority shareholder in our group of Irish companies [Publicis Dublin, Publicis D, Pembroke PR].

“It’s far too early to know what the implications of this proposed merger will be for Ireland but as always, we will do whatever is in the best interests of our clients. Our affiliation with Publicis is good for us, but we are very much in charge of our own destiny right now.”

He said it would most likely be 2014 before the merger led to any changes in the Irish marketplace.

“The deal has to go through regulators first and get approval. Once that happens, I think the merged company will focus on their bigger marketplaces first.”

He said the Irish arm of the business only found out about the merger this week.

“As both companies are listed on the stock exchange, very few people know about a deal before it’s done. Any leaks could affect the share price, thus we were only told about the merger just before it was announced to the public.”

Deirdre Waldron, managing director of Cawley Nea\TBWA said the proposed merger would have no immediate impact on the firm, which is part of the Omnicom group.

“It’s business as usual for the rest of the year. The first impact will be on the media buying side, and there will be huge opportunities in that area as well as in the area of combined analytics.”

She said the merger would also create benefits on the creative side: “It will allow us to be local and global at the same time. We will be communicating locally to our clients but with global expertise.”

Aegis Media chief executive Liam McDonnell said he believes both Publicis and Omnicom would face just as many challenges as opportunities with regard to the merger.

“We are not complacent. We have our own operating model. That said we are influenced by our competitors and we do watch what goes on. We will be taking more than a passing interest in this merger.”

Among the challenges faced by the merging companies will be the existence of co-chief executives. Two heads are not always better than one and can create difficulties in decision- making, performance management, logistics and accountability.

The merger may also give rise to trust issues among clients, considering there are client conflicts. Omnicom has Pepsi as a client, while Publicis has Coca-Cola.

Mr McDonnell said he did not believe the merger would have any “real game-changing benefits” for the industry and for clients.

“I would have to assume it will put more pressure on the market in terms of yield and prices,” he added. “It’s already a buyer’s market.”

Announcing the merger, Omnicom chief executive John Wren said the two companies would be creating pure scale in terms of merging markets and production.

However, Mr McDonnell was quick to point out there was no point in having scale if you did not use use it.

The proposed merger of global Publicis and Omnicom will involve the coming together of companies in Ireland with a combined annual turnover of more than €200 million.

Publicis has a minority shareholding in Publicis Dublin, as well as a 16 per cent stake in Core Media Group.

On the Omnicom side, Omnicom Media Group, which comprises media agencies OMD Ireland and PHD Media, is 50-50 owned by two creative agencies, Irish International Communications Group and Cawley Nea Limited.