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After announcing a proposed merger over the weekend (or, as Bloomberg refers to it, a simmering “bromance”), Publicis Omnicom is set to become the largest ad company in the world. That is, it will if it’s approved by the reported 45 separate antitrust regulators who have to sign off on the deal. “Given the long history in advertising of growth by consolidation, the surprise was mild rather than deeply shocking,” the Economist writes of the reaction to the deal.
The “merger of equals” was first discussed by the two companies’ CEOs in Davos, and the idea solidified over the last six months. While the two company heads, Maurice Levy (Publicis) and John Wren (Omnicom), will be co-CEOs for the time being, Reuters reports that after a 30-month transition period, the company will have an American CEO, headquarters in the Netherlands, and stock listed in New York. The 71-year-old Levy will remain on the board as non-executive chairman, notes Gina Chon.
The two companies represent a number of big-name rivals, including Coke and Pepsi, McDonald’s and Taco Bell, and AT&T and Verizon, which may prove to be a problem. David Jones, head of rival agency Havas, told the Economist, “I doubt you’ll find a single client who says, ‘we wish you were bigger and we were less important to you’”.
But as advertising becomes increasingly tech and data-based, the deal could be a bet that bigger means better on the internet. Matt Yglesias argues that this merger is a response to fear of tech companies, which largely cut out the advertising middlemen through direct, targeted advertising. “The combined company wants the muscle to rival Google, which dominates digital ad buying with a 30% market share according to eMarketer (Facebook has a 5% share)”, writes Lex.
However, ad exec Dave Morgan, of Simulmedia, told Peter Kafka he doesn’t think that tech is the primary motivating factor here. “These aren’t technology companies, and you don’t get better tech development out of consolidation”, he argues. Instead, says Morgan, it’s likely about much more common reasons to merge: “The bigger they are the more they can reduce costs/redundancies and hold profit margins and manage debt cheaper”. – Shane Ferro
On to today’s links: