With the impending partnership between Publicis Groupe and Troyka’s Insight in Nigeria, the botched mega merger deal, the biggest in the global ad industry, between Publicis and Omnicom became of interest to the Nigerian ad industry, Brandcrunch reviews the issues with agency reports.
It came as a rude shock to industry players on Thursday when news of the breakdown of the much talked about $35 billion "merger of equals, deal between " Publicis Groupe and Omnicom Group came crumbling like a pack of cards last week.
The merger deal which hit the rock was mired in multiple issues, but Mr. Maurice Levy, CEO, Publicis groupe said the trigger for him was Omnicom's first-quarter 2014 results call with analysts, when Omnicom’s CEO John Wren discussed details of the merger.
Why the bubble busted on the Adland’s Biggest Deal Ever
The coming together of global agency holding companies would have created adland's biggest behemoth. A merger of Omnicom Group (market cap: $16.8 billion last July) and Publicis Groupe ($15.6 billion) historically would have been the biggest agency deal, dusting Dentsu Inc.'s $4.9 billion acquisition of Aegis Group in March 2013 and WPP's $4.7 billion purchase of Young & Rubicam in 2000.
Some of the issues blamed for the collapse of the deal include unco-ordinated statements on the deal, some U.K. tax issues (same issue in China) and the question of who was in charge. Mr. Levy said, "The other was organizational and who was in charge, and the third was implementation of shared services [and the model for that]. We went back and forth for months to see how to come to an agreement about implementation of shared services and the organization and weren't able to fix it."
For Omnicom, their grouse was "Our perspective (similar to Publicis), is there were many complexities related to the deal -- tax, anti-trust, financial regulatory, management structure, cultural differences," an Omnicom spokesperson was quoted to have said in an Adage report.
The agency holding companies, owners of many of the most prominent ad networks in the world, blamed the blowup on "difficulties in completing the transaction within a reasonable timeframe," as an Omnicom statement put it. The initial take off of the merger talk was announced more than nine months ago but parties blamed a number of issues as being responsible for the break down.
Comments by Concerned Parties
One of the statements claims, "The parties have released each other from all obligations with respect to the proposed transaction, and no termination fees will be payable by either party," the statement said. A $500 million termination fee would have applied if either company had walked away unilaterally.
In a statement by Omnicom, Mr. John Wren, CEO, Omnicom says "I want to emphasize that while the proposed merger was time-consuming, we never took our eye off the ball in terms of what we needed to deliver for our clients, our people and our shareholders. And that has been reflected in our reported results. We're bullish on 2014."
Recent comments from Mr. Levy and Mr. Wren had suggested that the deal could fall apart. On April 17, Mr. Levy said during a presentation of first quarter results that he was "confident the deal will go through." But he added: "I would like to stress that Publicis has a very clear strategy with strong objectives and a strong position and I do believe we are the best holding company in our sector for the future, bar none. There is no issue if we go back to a standalone company. Life is good for Publicis whatever happens."
Nothing Changes in Nigeria
Meanwhile, reacting to the break down, Nigeria’s Czar of Advertising, Mr. Biodun Shobanjo, Chairman, Troyka group, reacting on the implication of the botched merger deal the evolving partnership between Insight and Publicis, says it has no implication whatsoever for the partnership.
Mr. Shobanjo says in a chat with Brandcrunch “Our relationship is with Publicis Groupe”. For the industry, he says nothing changes, it’s business as usual for the industry, competition amongst players in the industry continues”.
Also reacting, Tunji Abioye, CEO, Fuel Communications holds the opinion that the breakdown of the merger talks may simply be temporary. “There is nothing on the horizon that says the consummation will not happen in the medium term”.
Be that as it may, for Abioye, the setback would only mean a sustenance of the existing relationships, structures and networks in the Nigerian market (at least for now), he reasons.
Sorrell saw it coming!
The collapse of the planned merger could be a good omen to rival Martin Sorrell’s WPP Group as it once again keeps its top spot in the industry by revenue, at $17.25 billion. While the collapse came as a surprise to many, Mr. Sorrell did not bath an eyelid as he claimed in an interview, “I don't think it was a surprise. It was probably somewhat surprising that it came so quickly. A lot of people believed that it would crank on for another month or so, but most people thought it was a dead deal”.
Speaking on the lessons inherent in the deal gone awry, the WPP CEO blamed the two CEOs for “sitting in a room formidably for six months discussing a deal of this size without talking to anyone else or what they call expensive advisors. Perhaps they should have spent time with expensive advisors. If you do a deal of that nature you should think it through before you announce it”.
As the rival that he is, Sorrell would rather think the botched deal was an emotional decision. “Wren and Levy wanted to knock WPP off its perches. Any deal was doomed to fail. Secondly, it was Gallic charm. Wren was charmed by Levy into believing Levy would ride off into the sunset. That clearly was not the case if you look at the structure. The third thing: Their eyes were bigger than their tummy”.
