Martin Sorrell Thinks Publicis Omnicom Group Will Have to Consolidate

WPP head questions his rivals' claim that they won't combine agencies

The claims of merger partners Omnicom Group and Publicis Groupe notwithstanding, WPP Group CEO Martin Sorrell expects the mega-merger to result in consolidation among Omnicom and Publicis Groupe shops.

Sorrell made his prediction today during a call with industry analysts, which primarily focused on WPP's third-quarter results. But Sorrell being Sorrell, he veered occasionally into competitive sniping about "POG"—sometimes without prompting but also when analysts asked about the impacts of the merger.

"Strategically, if you think that new markets and new media are key, which we do and Publicis used to, [the merged company] goes backwards. It doesn't go forwards," Sorrell said. "It therefore puts greater stresses and strains on their traditional outfits."

In Sorrell's mind, the multiplicity of traditional agencies in markets such as Italy, Belgium, the Netherlands, France and possibly the U.K. will be too costly to maintain separately.

"That's because that segment of the market, which is to say the traditional agencies in what is now a bigger bucket, is of more significance [cost-wise] and that's not the growing part of the business," Sorrell said. "And they may say that 'We're not going to consolidate the agencies,' but in my view, looking at it from the outside, they're going to have to if they're going to make it work."

Of course, Omnicom CEO John Wren or Publicis Groupe CEO Maurice Lévy won't lose any sleep over what their chief rival says. Still, Sorrell added that the pending merger is a "case of be careful what you wish for. And it will become more complicated."  

For Q3, WPP reported revenue growth of more than 7 percent in what the company described as a marked increase from the first two quarters of the year.

WPP ended Q3 with $4.34 billion in revenue, up from $4.03 billion in the same period last year. On an organic basis, revenue grew 5 percent for the quarter.

In a statement, WPP said, "What we lost on the swings of the fast growth markets (such as Brazil and Russia) was more than compensated by what we gained on the roundabouts of the slow growth mature markets of the United States and Western Continental Europe."

Western Continental Europe, which supplies roughly a fifth of WPP's total revenue, grew by nearly 10 percent in the quarter, while North America, which supplies more than a third of all revenue, rose 7 percent. Revenue growth was highest in the U.K. (12 percent of WPP's total) at 13 percent.

With a quarter to go, WPP anticipates 3 percent revenue growth for the full year and a 0.5-point improvement in its operating margin. As for 2014, Sorrell is projecting overall revenue growth of between 3 percent and 5 percent.