How a combined Omnicom-IPG would stack up against the ad industry

Omnicom Group’s acquisition of Interpublic Group of Cos. would bring a new world order—and a world of challenges for Omnicom to deliver on the deal’s promises. The transaction would make Omnicom the biggest agency company on the planet. (At least until the next merger.) Omnicom Chairman-CEO John Wren, 72, snared the biggest-ever agency holding company deal (and probably his final big deal) a decade after an earlier merger scheme—Omnicom and Publicis Groupe—imploded. Now comes the hard part: Winning over skeptical investors, completing the acquisition and making it work. New world order: 10 biggest agency companies Omnicom would be at the top of the heap after it buys Interpublic. U.S. dollars in billions. Rank assumes deal closes and is based on 2023 revenue. Rank Agency company/headquarters Revenue in 2023 U.S. Rest of the world Worldwide U.S. as % of worldwide 1 Omnicom + InterpublicNew York $14.5 $11.1 $25.6 57% 2 WPPLondon 6.5 12.0 18.5 35 3 Accenture's Accenture Song1 New York 8.5 9.5 18.0 47 4 Publicis Groupe Paris 9.1 6.9 16.0 57 Omnicom Group New York 7.5 7.2 14.7 51 5 Deloitte's Deloitte Digital New York 6.2 5.8 12.0 52 Interpublic Group of Cos. New York 7.0 3.9 10.9 65 6 Dentsu Group Tokyo 2.2 7.1 9.3 24 7 BlueFocus Communication Group Beijing 0.0 7.4 7.4 0 8 IBM Corp.'s IBM iX2 Armonk, New York 2.5 4.6 7.1 35 9 Hakuhodo DY Holdings Tokyo 0.6 6.5 7.0 8 10 Cheil Worldwide Seoul 0.3 2.9 3.2 9 Investors aren’t sold on the deal. Omnicom’s shares tumbled 10.2% to $92.82 on Monday, far below the all-time high of $107 reached last month. For Omnicom and Wren, buying bigness could be an expensive wager. If the deal goes through, IPG shareholders would receive 0.344 Omnicom shares for each IPG share they own—implying a value for IPG shares of about $32 based on Omnicom’s Monday closing price. IPG closed Monday at $30.30, a meager gain of 3.6% from last Friday’s pre-deal closing price and well below IPG’s 52-week high of $35.17 last March. The deal continues the agency world’s decades-long path of consolidation. And it marks the end of the road for IPG, which wrote the early playbook on agency mergers and acquisitions before being surpassed by the likes of WPP, Publicis and Omnicom. IPG was incorporated in 1930 as McCann-Erickson, the result of a merger of ad agencies founded by Harrison K. McCann and Alfred W. Erickson. McCann-Erickson’s pioneering president, Marion Harper Jr., created the first major agency holding company in 1961. “McCann-Erickson has reorganized again, with the establishment of a new parent company, Interpublic Inc.,” Ad Age wrote at the time. “Interpublic, the new corporate umbrella, will provide the affiliate companies with management and financial guidance and central services such as personnel and accounting.” IPG took its current name—The Interpublic Group of Companies—in 1964, setting the stage for it to acquire agencies across disciplines and across the globe. The company went public in 1971. Ad Age World’s Largest Advertisers 2024 Global ad spending, rankings, analysis and profiles for the biggest marketers Click here IPG was the biggest agency company back in 1985. But the world was about to change. That year, Martin Sorrell took a stake in Wire & Plastic Products, a publicly traded U.K. wire-shopping-basket manufacturer. In 1986, Sorrell renamed the basket company WPP Group, using it as a platform to acquire marketing-services ventures. Omnicom Group exploded on the scene in 1986 in what Ad Age dubbed the “Big Bang,” the merger of BBDO, Doyle Dane Bernbach and Needham Harper into a new holding company. (Wren, a former Arthur Andersen management consultant, joined Needham Harper in 1984; he became Omnicom CEO in 1997. Doyle Dane Bernbach and Needham Harper now operate as DDB.) Saatchi & Saatchi countered the Omnicom rollup by acquiring Ted Bates Worldwide, a major U.S.-based agency. The Bates deal made London-based Saatchi & Saatchi the world’s largest agency company. Sorrell in short order grabbed J. Walter Thompson and Ogilvy Group, making WPP the top agency firm. Publicis snapped up Saatchi & Saatchi in 2000 and Bcom3 Group (Leo Burnett, Starcom MediaVest) in 2002, solidifying its position as a global holding company powerhouse. Tracking the latest Omnicom-IPG merger news and analysis Decades of deals and faulty bookkeeping caught up with IPG in 2002, when the company revealed problems with its internal accounting. That led to a Securities and Exchange Commission inquiry, a series of financial restatements and a wrenching period of change in management and the organization. Standard & Poor’s in 2003 downgraded IPG’s corporate debt to speculative or junk status. IPG in 2007 completed a plan to fix “material weaknesses” in financial controls, and the company in 2008 reached a settlement with the SEC. IPG didn’t climb back to an S&P investment-grade rating until 2015. IPG emerged from the ordeal. But the early agency holding company innovator was no longer a leader of the pack. Omnicom reigned as the biggest agency company earlier in this millennium, delivering strong operating performance while opting against the massive dealmaking of some of its rivals. WPP supplanted Omnicom as the world’s largest agency company in Ad Age’s rankings starting in Agency Report 2009 (based on 2008 revenue). WPP has held the No. 1 spot since then (with Accenture’s Accenture Song close behind in the most recent ranking). The acquisition of IPG would put Omnicom back at the top of the heap, creating a global behemoth with 2023 combined revenue of $25.6 billion, based on Ad Age Datacenter’s analysis using figures from Ad Age Agency Report 2024. (See table, above.) Omnicom ranked No. 4 among agency companies based on 2023 revenue in Ad Age’s most recent ranking, behind WPP, Accenture Song and Publicis. Omnicom was the third-biggest legacy agency holding company, behind WPP and Publicis. Ad Age ranked IPG No. 6 among agency companies in 2023. IPG was the fourth-biggest legacy agency holding company, behind Omnicom. Omnicom’s worldwide revenue ($14.7 billion in 2023) has, following various smaller acquisitions and divestitures, barely budged from stated revenue a decade ago ($14.6 billion in 2013). Buying IPG, assuming the deal closes, would give Omnicom additional revenue and scale that it could not achieve on its own. This would be an acquisition of a smaller rival in the late stages of a maturing agency market. It’s a merger of unequals, given differences in revenue and organic growth. Organic growth, a common measure of performance for agency companies, is growth excluding acquisitions, divestitures and effects of exchange rates. Omnicom reported worldwide organic revenue growth of 4.1% in 2023 and 5.2% in the first nine months of 2024. Omnicom has a full-year 2024 organic growth target of 4% to 5%. In contrast, IPG reported an organic decrease in net revenue of 0.1% in 2023. IPG had organic growth of 1% in the first three quarters of 2024, and it expects full-year 2024 organic growth of about 1%. Based on the measure of recent organic growth, Omnicom is buying a weaker-performing competitor. That presents challenges for Omnicom in integrating the business and keeping Omnicom’s solid rate of organic growth on track. It’s up to Omnicom and Wren to deliver the biggest bang for the bucks. Ad Age Agency Report 2024 Revenue and analysis for agency companies Click here

How a combined Omnicom-IPG would stack up against the ad industry

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