A Merger of Equals? No Such Thing

A couple demitasse cups of coffee and an off-the-cuff remark led to the creation of the largest marketing-services company in the world. The story of how Omnicom Group and the Publicis Groupe came together in advertising's biggest merger, as told by their leaders, is not one of a tense negotiation but rather a casual, rolling conversation over six months. It began, unexpectedly, on a balcony overlooking the Champs-Elysees. "It's priceless," Omnicom's John Wren uttered as he gazed out onto the Arc de Triomphe from his competitor's private rooftop terrace. "It can be yours," responded Publicis's 71-year-old Maurice Levy. Mr. Levy has initiated hundreds of approaches to buy ad firms in 25 years as CEO of Publicis, and still he told analysts, "I don't know why I reacted by saying "it can be yours.' I honestly had no idea what I was talking about." Initially, he said, it seemed "stupid." But over time, Mr. Wren became convinced that maybe Mr. Levy's offer should be taken seriously. It's clear there's mutual respect between the two CEOs: They rarely missed a moment to stress that during last week's barrage of press conferences. This is not about one company taking over the other, they say. But this "merger of equals" still looks lopsided. LEVY LEADS THE WAY Even with the co-CEO structure and equal representation on the board, many industry observers say they can't help but feel as if the third-largest holding company, Publicis, has somehow managed to take over the second-largest. Indeed, when the deal closes, former shareholders of Publicis will own about 50.64% and former shareholders of Omnicom will have 49.36%, based on company estimates. Such a brash move would be in line with the deal-making appetite of Mr. Levy -- and speculation he'd end his reign there with a dramatic M&A deal. Mr. Levy is only the second leader of the French ad giant, having taken over from founder Marcel Bleustein-Blanchet. Over the past five years he's shelled out more than $3 billion in a buying spree that included Digitas, Razorfish, LBI, Rosetta and Rokkan. In contrast, colleagues of the conservative Mr. Wren have been known to call him cheap when it comes to M&A spending. He passed on several possible acquisitions. He rejected the LBI sale, telling shareholders and Wall Street he'd rather build digital organically than invest in it. PARLEZ-VOUS FRANCAIS? The culture already feels more Publicis than Omnicom, perhaps because Publicis is 60 years older, or maybe because France is such a strong part of Publicis and vice versa. Publicis Groupe was founded in 1926 by Mr. Bleustein-Blanchet, a national hero after serving in the French Resistance before escaping to England to join American troops. Chairwoman and major shareholder Elisabeth Badinter is married to a former minister of justice. As one of France's top business leaders, Mr. Levy has woven Publicis into the fabric of France's politics and economy. Last year, he entered the national debate on higher taxes for the wealthy, co-signing an open letter headed "Tax Us" in a French publication. Publicis is simply much more important in France than Omnicom is in the U.S. Mr. Levy has always seen running Publicis as an honor from Mr. Bleustein-Blanchet that he must pass on not only intact but strengthened. He told analysts: "We want something that will be our legacy." Perhaps it's no surprise, then, that Mr. Wren flew to France for the announcement, where Mr. Levy held court, switching between English and French and charming reporters with little asides. MERGERS OF EQUALS Historically, mergers of equals have had a weak track record. There was the troubled Franco-U.S. marriage of Alcatel with Lucent Technologies, German Daimler's tie-up with Chrysler, which ended badly, and Ticketmaster Entertainment's deal with LiveNation, which drew barbs from senators to Springsteen. Generally speaking, trying to maintain a fair balance can be distracting, especially as the cultures mix. And corporate executives aren't well-known for their willingness to share power, let alone with former rivals. This one will be different, Mr. Levy promises. He told analysts last week they'll be "extremely surprised" at just how easy and risk-free it is.

A Merger of Equals? No Such Thing

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