Ad Mega-Merger: What Publicis Omnicom Group Means for Advertising

Ad Mega-Merger: What Publicis Omnicom Group Means for Advertising

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Two of the largest advertising agencies in the world, Omicom (OMC) and Publicis (PUBGY), announced a merger over the weekend in a move that will make them the biggest advertiser in the business. The new company, Publicis Omnicom Group, will have headquarters in New York and Paris and is expected to generate $500 million in profitable synergies.

The firm will have a combined market value of $35 billion, and is the largest deal of its kind in the history of the advertising industry. Many are beginning to speculate whether this will lead to further consolidations, as existing companies struggle to acquire or expand their operations in big data and emerging markets. 

Publicis has already acquired several companies in digital media, hoping to take advantage of online advertising's growing share of the market. While the majority of ad revenue is still generated in television, internet advertising is growing at a faster rate.  

The two companies together would represent about 20% of the global media business. Some analysts are skeptical about the merger, saying that companies are looking for advertisers who can adapt quickly to the latest trends, not necessarily provide the greatest army of talent. Publicis has made a number of acquisitions to expand its operations in online advertising, however larger companies are harder to manage quickly – and international mergers, particularly between "equals" don't necessarily pan out. 

Detractors cite the failed merger of Damler Auto (DDAIF) and Chrysler as an example of the problems that can come when companies from different countries overestimate their prospective "synergy." Besides, as former competitors, Omnicom Publicis Group will now have several conflicts of interest – most notably between Coca-Cola (KO) and Pepsi (PEP), that will have to be managed.

Whether this means that other advertisers will try to poach reluctant clients, or follow suit in their own mergers is hard to say. However it also makes clear the growing importance of digital communications in an industry once dominated by TV. 

Will traditional advertisers be able to keep up with growing competition from digital companies such as Salesforce (CRM), Sapient (SAPE), and Accenture (ACN)? Use the charts below to begin your own analysis.

The List

1. Omnicom Group Inc. (OMC, Earnings, Analysts, Financials):Provides advertising, marketing, and corporate communications services. Market cap at $16.78B, most recent closing price at $65.11.
 

 

2. Publicis Groupe SA (PUBGY, Earnings, Analysts, Financials): Provides a range of advertising and communications services worldwide. Market cap at $16.04B, most recent closing price at $19.77.
 

 

3. Salesforce.com (CRM, Earnings, Analysts, Financials): Provides customer and collaboration relationship management (CRM) services to various businesses and industries worldwide. Market cap at $25.43B, most recent closing price at $43.22.

 

4. Sapient Corp. (SAPE, Earnings, Analysts, Financials): Offers integrated marketing and creative services. Market cap at $1.83B, most recent closing price at $13.32.
 

 

5. Accenture plc (ACN, Earnings, Analysts, Financials): Provides management consulting, technology, and business process outsourcing services worldwide. Market cap at $46.71B, most recent closing price at $73.12.

 

(List compiled by James Dennin. Analyst ratings sourced from Zacks Investment Research, all other data sourced from Finviz.)

 

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One Response to “Ad Mega-Merger: What Publicis Omnicom Group Means for Advertising”

  1. Thanks for really interesting insight. That's what I really wanted to see for a long time.

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