After unveiling plans to create the ad industry’s largest player, Publicis Groupe and Omnicom execs have reiterated that theirs is a “merger of equals,” and the deal’s financial structure is a balanced one. But the reality with any corporate combo is that one culture eventually prevails.
Nothing is expected to change at once, but it is hard to see how a dual-management structure will work in practical terms.
“Two very different cultures/management styles coming together could create a bit of a clash from the senior level on down to some of the agencies,” said JP Morgan managing director Alexia Quadrani. “While we have respect for [Publicis’] Maurice Lévy and [Omnicom’s] John Wren, it will be unchartered waters for the two of them working together.”
Brian Wieser, a senior analyst at Pivotal Research Group, expects that “one of the two companies will end up dominating,” adding, “I think Omnicom will become more European over time.”
The personalities of the new co-CEOs are indeed different. Charismatic, outgoing Lévy likes the limelight while Wren is more of an inside businessman. That was on display July 28 at the Paris press conference where Publicis-Omnicom debuted. While some saw that as an indication of a French-led transaction, initiated by Lévy six months ago, others viewed it as public reassurance to French regulators that one of the country’s iconic companies is not being handed over to Americans.
There were other indications of horse-trading. Omnicom chair Bruce Crawford emerged as nonexecutive chairman of the combined entity for the first year while Publicis chair Elisabeth Badinter, the company’s largest shareholder and daughter of the founder, takes over in the second year.
Now execs at both holding companies wait to see who emerges as CFO. Randy Weisenburger, Omnicom’s chief financial exec, is expected to prevail over Publicis’ Jean-Michel Etienne. That move could skew the headquarters infrastructure to New York.
Lévy is only the second CEO of 87-year-old Publicis, having been successor to founder Marcel Bleustein-Blanchet. As the 71-year-old Lévy contemplates his own legacy, he is fiercely protective of an agency that lagged its peers in international expansion only to become the No. 1 global player.
“Publicis has never come second in any deal it’s done,” said one former Publicis exec. “People underestimate Maurice Lévy. He’s officially been retiring three times now. Will he ever let go?”
Omnicom has more holding company infrastructure than Publicis, which is historically more profitable and is more focused on margin improvement. Overhead at both companies will be scrutinized to achieve some of the promised $500 million in efficiencies. One thing that will need to be more standardized: compensation.
“It’s much harder to earn bonuses under the Publicis system. It’s one for all, all for one,” said a former Publicis agency source. “I can’t see it going the American way because it could lead to lower margins. In the states, bonuses are a part of the culture, with many more contractual links.”
The companies are setting up committees to deal with such issues. How much of a distraction that becomes to operating execs will be closely watched by rivals, particularly as it applies to top talent who feel neglected in the integration. In recent years, Omnicom has made few acquisitions, and its managers have had little experience integrating disparate operations and new ways of collaboration.