In a curiously, somewhat combatively titled press release
("Precision"), Publicis Groupe last week tried to assure the world
that all remains well with its $35 billion merger with Omnicom Group. It laid out the
technical challenges obstructing the deal's closure (Netherlands is
the legal domicile; French tax authorities need to issue a ruling;
the merged company's main residence for tax purposes will be the
U.K.; and China still hasn't given an antitrust blessing). Publicis
said the French process was "standard," it was "confident" about
the U.K. and there was "no indication" that Chinese approval was
not forthcoming in "a reasonable time period."
It was all very, well, precise.
Indeed, some of the delays, like the wait for a key filing with
the Securities and Exchange Commission, don't necessarily spell
doom. "Nine months is not out of the ordinary," said Donna
Hitscherich, senior lecturer at Columbia Business School. "It takes
time to get stuff together."
Still, it feels like an eternity since the agency-company giants
said last summer that their union might happen before 2013 was out.
And just as the deal itself was a hard sell (remember the four
press conferences held to explain its merits?), convincing people
it isn't falling apart is proving just as difficult.
Analysts and investors have started buying into the prospect
that the deal could be thwarted by the French tax issue. That's
probably a stretch. "I can't think of a deal scuttled by tax
considerations," said Robert Willens, a tax expert and president of
Robert Willens LLC. "I've never seen that happen."
But the long engagement is clearly also rattling the nerves of
company insiders who say there's more to the holdup than the
regulatory hurdles now relentlessly cited. Both companies declined
to comment for this story.
Here's what outsiders are watching:
Proposed merger is announced. Publicis and Omnicom say they
expect to complete their merger as early as the end of 2013.
Publicis CEO Maurice Levy claimed the French government has been
supportive of the deal and it will get past regulators, while
Omnicom CEO John Wren said advisers had "not raised any red
"I don't anticipate any major issues," said Maurice Levy,
Publicis Groupe's chairman-CEO, while addressing analysts and press
about the company's third quarter earnings on October 16. "The hard
work is behind us –now it's just a process that we have to
U.S. antitrust regulators sign off on the deal.
"We'll close certainly in the first half and as early as we can,"
Mr. Wren told a conference in November.
Maurice Levy, Publicis Groupe chairman and CEO, says he
anticipates a positive decision from China by mid-January, and from
Colombia by the end of January, with other remaining territories to
follow soon after.
EU regulators approve the deal.
The merger now looks likely to drag beyond the second quarter of
this year, Omnicom CEO John Wren said during an earnings call.
In announcing first-quarter earnings, both companies reference
tax holdups in the UK and France, as well as reemphasize regulatory
delays from China's antitrust authorities.
"There is no issue if we go back to a standalone company," Mr. Levy
said. "Life is good for Publicis whatever happens."
"It's not practical to predict when the merger will close," Mr.
Wren said. "The next steps are going back to regulators and
[deciding] what we need to do and don't need to do. There is no
plan B." Referring to tax agreements in the UK, among other things,
he added, "We still have a lot of work ahead of us."
One day after Omnicom's earnings, Publicis sent out a release
entitled "Precision," outlining the regulatory hurdles
Executives at Publicis and Omnicom agencies say a battle for the
chief financial officer spot is raging, part of the larger,
slow-motion contest for dominance between the two giants.
That pits Jean-Michel Etienne of Publicis against Randall
Weisenburger of Omnicom. The two are vastly different in style and
accomplishment. Executives based in the U.S. described Mr. Etienne
as brilliant, having been closely involved in the holding company's
acquisitions of U.S.-based Digitas and Razorfish. But he's more experienced with
Mr. Weisenburger is a Wall Street favorite, according to
industry executives. "There's a clear preference among the
Americans for Randy to have that job and presumably there's some
horse-trading between the two entities about who gets what role,"
said Brian Wieser, senior research analyst at Pivotal Research.
However, with Omnicom CEO John Wren poised to lead the combined
company as chief executive (after an inevitably awkward 30 months
with a co-CEO structure), putting Mr. Weisenburger in the CFO chair
might upset Publicis and its home base of France.
"Publicis is a huge employer and a huge part of French pride,"
said one executive familiar with the companies. "That's a big
The future of media
The future structure and leadership of the media agencies involved
is just as complicated and the personalities involved just as
diverse. And while the brands may not be merged, the media bosses
will nonetheless be jockeying for power. The bosses include:
Canada-bred and New York-based Daryl Simm, CEO of Omnicom Media
Group; Chicago native Laura Desmond, CEO of Starcom MediaVest Group, part of Publicis;
and U.K.-based Steve King, CEO of Zenith Optimedia, also part of Publicis.
The contrast was evident at the Publicis-Omnicom get-to-know-you
gathering in Miami last fall, according to people familiar with the
matter. In presentations about their agencies, the three were also
encouraged to share something personal. Mr. King showed photos of
himself bike-riding, discussed the firm's basic approach and ROI
positioning, and acknowledged his respect for Omnicom's media
operation and opportunities for collaboration with OMG. Ms. Desmond talked about SMG's
experience-agency positioning and capabilities, and showed photos
of a sunset from a summer vacation. And Mr. Simm presented the
basics on the shops' models (PHD is planning-oriented, for example) and
how they work together. He passed on the personal photos.
Bringing together their digital functions will give the holding
companies an opportunity to seek efficiencies and strengthen their
capabilities. But doing so won't be easy. For one, the two sides
are structured differently and there's no clear leader.
Publicis has large digital agencies like Rosetta, Razorfish and Digitas
LBi, which operate independently within the
holding company. All have proprietary technology and huge teams
that specialize in working with vendors like IBM. Omnicom's digital services
and agencies, however, are woven into their larger general-market
agencies, like BBDO and TBWA/Chiat/Day. At Publicis Groupe, Rishad
Tobaccowala sits above the three digital giants as chairman.
Omnicom Digital CEO Jonathan Nelson oversees digital strategy for
While these digital media and data groups have clear strengths
and similar goals, Omnicom wins for consistency. Scott Hagedorn has
run Annalect since its inception in 2010, and
Josh Jacobs has overseen trading desk Accuen for a few years.
At Publicis, VivaKi has struggled to forge an identity
since restructuring and putting its financial chief, Frank Voris,
at the helm. Kurt Unkel, former president of the VivaKi Nerve
Center and programmatic ad-buying platform Audience on Demand, left
this January to take on the chief digital role for WPP's Team Detroit.