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Posted by David Cooperstein on July 28, 2013
The penned merger of equals between Publicis and Omnicom takes two large networks of agencies and folds them into one behemoth holding company significantly larger than WPP, which would fall into second place. To gain strength in building a future, Publicis has been aggregating large digital shops to complement its traditional creative agencies; at the same time, Omnicom has been amassing a large contingent of small shops that grew quickly under its Diversified Agency Services (DAS) umbrella of digital firms in the race to lead the "new" thing.
Why merge now? The ad agency world and the technology world are on a collision course, centered on how well companies manage their business or consumer customer. I first mentioned this in a post about change management in my Forbes blog almost exactly one year ago. As agencies find themselves up against tech services giants like IBM, Accenture, Sapient and Deloitte, they are being asked to deliver:
On the client side, the outcomes are likely to be predictable. On the plus side, marketers have been growing their roster of agencies to ensure they have best of breed, and then have to work hard to co-ordinate these diverse teams. The merger of these two holding companies should provide more diverse choices to work with leading agencies under one holding company umbrella. Also, a larger buying center should mean better negotiating power for paid placements and technology services. By consolidating massive media buying power under one roof, one outcome should be better buying power and influence.
There are major - though predictable - negatives, in the name of more client conflicts and less negotiating power on fees. Once the client conflicts are worked out, multi-national marketing purchasing departments will struggle to negotiate if they want the scale and depth of holding company relationships.
Watch for a range of new agencies to emerge a year from now, as entrepreneurial agency founders decide to take their name on the road to smaller firms or other parts of the industry (of note: Bob Lord's decision to jump from running Razorfish, DigitasLBi and Denuo to join AOL earlier this month. Coincidence? I think not.). Also, watch for Havas, Dentsu/Aegis, and IPG to get the stare through deal hunters' binoculars as the search for more acquisition targets focuses on fewer, bigger game.