Belfast Telegraph

Friday 26 December 2014

Sir Martin Sorrell warns after advertising agencies' mega-merger

WPP's Sir Martin Sorrell
WPP's Sir Martin Sorrell

WPP advertising supremo Sir Martin Sorrell has said rivals Publicis and Omnicom will suffer a wave of client defections and an exodus of talent after their £23bn mega-merger.

France's Publicis – owner of agencies Saatchi & Saatchi and Starcom Media Vest – and America's Omnicom, which owns Abbott Mead Vickers and Adam & Eve DDB, are each thought to employ more than 3,000 in London.

Their combined worldwide staff will total 130,000, creating the world's biggest advertising group by revenue.

"This is a seismic shock to the industry and this will make clients and people think about what they're doing," said Sorrell, whose company will lose its crown as the world's biggest ad group. "This gives us a big opportunity."

Broker Liberum Capital reckoned Publicis and Omnicom would suffer "some likely client losses" as the two companies work for rival clients such as Coca-Cola and Pepsi.

"Somewhat counter-intuitively, we think this is a positive for WPP," said Liberum. WPP shares rose more than 2%.

Omnicom chief executive John Wren, who will be co-chief executive with Maurice Lévy of Publicis, admitted these conflicts of interests could be a challenge. "Do I expect to have difficulties? Yes. Do I expect to have resolutions? Absolutely," he said.

Regulators will need to approve the deal. Publicis has a 21.1% share of the global media-buying market and Omnicom has 14.5%, giving them a combined 35.6%, which will mean they leapfrog WPP on 28.1%, according to industry analysts Recma.

In the Americas, Publicis Omnicom will have a 41.6% share, although WPP will remain dominant in Europe, including the UK, where it employs around 12,000.

Numis analyst Paul Richards said: "It is a very positive move for Publicis and Omnicom." Both companies have similar stock market valuations and it is a merger of equals, despite Omnicom having revenues of $14bn (£9.1bn) and Publicis only $8bn (£5.2bn).

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