How Omnicom plans to save $750 million a year after acquiring IPG

Omnicom Group Chairman and CEO John Wren on Tuesday outlined how the company’s proposed acquisition of Interpublic Group of Cos. will yield $750 million in annual savings—pointing to post-merger job cuts and consolidation of back-office and operations. Speaking on Omnicom’s fourth-quarter and full-year 2024 earnings call, Wren reiterated that Omnicom and IPG employees dedicated to servicing clients and “generating revenue” won’t be affected by the merger. Instead, cost savings will “arise from streamlining holding company, middle office and regional positions, as well as from eliminating duplicative overhead, back-office, and third-party expenses across our larger combined global footprint.” “In assessing talent, we will adopt an approach focused on selecting the best individuals from across the organizations, irrespective of their current affiliation,” Wren said. “With unified Practice Area leadership teams at the global, regional and country levels, we will eliminate redundant roles, functions and back-office operations, which we expect will generate cost savings exceeding $130 million.” Wren later said the biggest savings would come from cutting 40% of the combined companies’ corporate expenses, including $200 million in compensation and $110 million in general & administrative costs. Additional efficiencies will be realized through procurement consolidation ($150 million), IT and shared services integration ($70 million), real estate alignment ($65 million) and administrative costs ($25 million), Wren outlined. Tracking the latest Omnicom-IPG merger news and analysis The combined company, to be known as Omnicom, would generate roughly 85% of its revenue from its top 10 markets, according to Wren, with the remainder primarily distributed across an additional 40 markets worldwide. Omnicom plans to maintain IPG’s advertising brands while integrating them into Omnicom Advertising Group’s structure, Wren said. In the top 10 global markets, IPG’s advertising brands will “continue to be fully present in order to drive growth.” In other markets, a single OAG leader will oversee agency brands locally and report to a regional OAG lead. “IPG’s other advertising and marketing services businesses will be aligned within our respective practice areas,” he added. Wren emphasized that the $750 million target is conservative, with more savings likely post-merger. Omnicom expects to drive revenue growth by expanding the offerings it can present to a much broader set of clients. Recent news: Omnicom and IPG give financial projections Another aspect of this merger to watch will be how clients respond. Wren said that he hasn’t seen any client concerns from the merger news, noting that Omnicom leadership will spend time later this month meeting with consultants to update them on plans, given that marketers often work with them. Shareholders of Omnicom and IPG will vote on the acquisition at special meetings set for March 18, according to a new regulatory filing. The meetings for Omnicom and IPG shareholders will take place virtually at 9 a.m. ET that day via live webcasts. The merger also needs regulatory approval in the U.S. and abroad. Omnicom and IPG hope to complete the deal in the second half of 2025. Omnicom had a full-year 2024 organic growth target of 4% to 5% and reported organic growth of 5.2% for both the fourth quarter and full year. It reported worldwide organic revenue growth of 4.1% in 2023. Organic growth, a common measure of performance for agency companies, excludes acquisitions, divestitures and effects of exchange rates. IPG will report its results on Feb. 12. Earlier Tuesday, rival Publicis Groupe reported organic net revenue growth of 5.8% for 2024, with 6.3% growth in the fourth quarter. Shares of Omnicom were down more than 2% in after-hours trading. IPG shares were unchanged after slipping nearly 0.7% on Tuesday, while Publicis shares climbed 2.3%. Ad Age Agency Report 2024 Revenue and analysis for agency companies Click here

How Omnicom plans to save $750 million a year after acquiring IPG

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