The acquisition of Omnicom-IPG seems like a good bet. Here’s why it can also be risky

Omnicom Monday announcement of its plans to acquire Interpublic Group has become the latest earthquake in the already fragile world of the agency world. If the deal closes, it will create the world’s largest advertising boutique, which will, to quote the joint press release, “bring together the industry’s largest pool of marketing talent and the broadest and most comprehensive services and products.” innovative, driven by the most advanced sales and marketing platform.

This upbeat talk sent IPG’s share price up 10% following Monday’s announcement. But partly because the agreement would reduce the big four in the advertising sector (WPP, Publicis, Omnicom and IPG) to just three. But it faces a multitude of operational and organizational challenges, not to mention regulatory challenges.

Big merger, long process

Internally, the biggest obstacle is how to bring these two colossal companies together. Beyond achieving the $750 million in “annual cost synergies” promised by the statementthe new entity must “create long-term value beyond cost-cutting measures — a basic expectation for a merger of this magnitude,” said Tammy Madsen, a professor at the University’s Leavey School of Business. of Santa Clara.

“The scale and complexity of the integration could take a long time, allowing technology leaders such as Google and Amazon to extend their lead in leveraging AI for personalized, data-driven marketing,” added Madsen.

Additionally, the difficulty in “aligning processes, technologies and cultures could slow down execution, diverting focus from innovation and customer service,” she said. “In a sector that requires agility, this represents a significant risk. »

Another risk is losing creative talent, whether intentionally or not.

“From an organizational perspective, it’s about aligning workforces, systems and company cultures and rationalizing office space, which requires careful planning and clear communication to minimize disruption , said Tom Allen, director of training and head of content at the Zurich-Institute for Mergers, Acquisitions and Alliances.

“Savings of $750 million might sound attractive,” Allen continued, “but if it involves large-scale job cuts, it could impact morale and create operational challenges.” Retaining top talent and ensuring customers feel safe during the transition will be critical to keeping everything on track.

A case of conflict avoidance

Then there is the issue of potential conflicts with clients, i.e. the risk that competing brands that had hired these two agencies separately would end up under the same roof after the merger.

Neither Omnicom chief Wren nor IPG CEO Philippe Krakowsky expressed concern about the matter in an interview with analysts.

Still, said Charles J. Skuba, a marketing professor at Georgetown University, “the biggest brands are going to be very demanding on conflict.” The bigger the customer, the more demanding they will be.

What will the attorney general say?

Of course, all of these operational hurdles could become moot if the proposed merger fails to get the approval it needs from federal regulators. And how likely is this to be the case? Opinions are divided.

“Bringing together the third and fourth largest advertising buyers will inevitably raise questions about market dominance, especially with projected revenues exceeding $25 billion,” Allen ventured.

Wren shrugged off the possibility of a regulatory kibosh, at least in talking to analysts. “The world is not divided into four societies,” he said. “There are things like Google, Facebook, Amazon… that meet people’s marketing needs.”

Like ADWEEK reported On Monday, Wren also expressed hope that the new Trump administration will be “more business-friendly.”

Well, maybe. The president-elect is considering Gail Slater as deputy attorney general for the Justice Department’s antitrust division, and her record touches both sides of the political divide. Slater worked as general counsel for the pro-tech lobbying group Internet Association, which took a strongly anti-regulation stance. Slater also served as an economic advisor to JD Vance, who recently declared via his X account that “it’s time to break up Google up.”

“Actually, I don’t think it’s [merger] That’s going to be a problem from a regulatory standpoint,” said Ivan Pollard, manager of the Conference Board’s marketing and communications center. “I know this will be a bit of a radical view, and not everyone will say that. I think there is still enough competition in the market [that] needs consolidated suppliers.

“The timing of this merger is perfect,” said Tim Malefyt, who teaches marketing at Fordham University’s Gabelli School of Business. “The current administration has moved to block major mergers, particularly between airlines, but the Trump administration is much less likely to stop the merger.”

Malefyt recalled that although Omnicom attempted to merge with Publicis in 2013 and failed, this new union was based on stronger, market-based arguments.

“[It] would significantly reduce costs and increase the amount of data available, access a wider and more diverse audience, create better targeted campaigns and better understand audience behavior across different platforms,” he said. -he declared.