Publicis, Omnicom likely to spark M&A wave

Publicis, Omnicom likely to spark M&A wave

As Publicis and Omnicom work on with their potentially landscape-altering merger, there has been much speculation as to ongoing consolidation and which rivals could soon follow suit.

Dealmaking in the advertising and marketing arena to date this year stands at US$21.4bn globally, from the announcement of 288 transactions, according to figures from Thomson Reuters.

Much of the talk as to other potential M&A activity has been targeted in the direction of the UK’s WPP Group – which stands to be ousted from its world No.1 spot by the announcement from Publicis and Omnicom – and whether it has the scale to continue on its own or whether it will now look to join forces with another of the global agencies. “WPP has long established itself as a formidable player,” say Macquarie analysts Tim Nollen, Sunny Kwak and Angus Tweedie. “So a deal with another industry peer does not seem necessary for WPP’s sake, although we would not preclude it,” they add.

Interpublic, the number four player by revenue which is suddenly much smaller than its two peers, the merged entity and WPP Group, could potentially be of interest to WPP suggests Michael Corty, an analyst at Morningstar.

“At a minimum, WPP has to consider acquiring Interpublic for at least two reasons: (1) as a sly way of preventing the Omnicom-Publicis deal by showing regulators (and huge corporate clients) what a world with two behemoth holding companies looks like and (2) as a way to quickly become on par revenue-wise with Omnicom-Publicis,” says Corty.

Drew Borst, an analyst at Goldman Sachs, suggests that the market may shift attention to Interpublic and Havas as consolidation targets, “given that both could benefit from margin improvement via increased scale in select media markets”.

“WPP, in our view, could be hamstrung by regulators, given its current scale in media and depending on whether regulators set a broader market definition (e.g., include data aggregators) in the Publicis-Omnicom review. Other companies have undergone recent acquisitions that may constrain near-term funding abilities (e.g., Dentsu/Aegis)”.

Read BTD’s commentary on this deal at