Awkward Timing for Publicom Failure as Industry Meets in Beijing

WPP's Sorrell at IAA Conference: Failed Deal Means 'Chickens Come Home to Roost'

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For Omnicom and Publicis, the timing of the collapse of their planned $35 billion merger was awkward: It came just as advertising leaders gathered in Beijing for the IAA World Congress. WPP CEO Martin Sorrell was among the first speakers Friday, and he couldn't resist making a few digs about his rivals' failed deal.

Publicis Groupe CEO Maurice Levy and Omnicom Group CEO John Wren in happier times.
Publicis Groupe CEO Maurice Levy and Omnicom Group CEO John Wren in happier times. Credit: Balint Porneczi/Bloomberg

"I think that was, and if I could be so bold, an ill-considered attempt at consolidation in our industry," said Mr. Sorrell, who frequently criticized his competitors' merger plans. The deal's failure means Mr. Sorrell's WPP Group will maintain its grip on the top spot in the industry by revenue, at $17.25 billion.

"What's interesting about the market mechanism is it shakes out deals that don't have a basic and strategic logic and underpinning," Mr. Sorrell said, adding that "the chickens come home to roost in the end."

The failed deal would have required regulatory deals from around the world, and China's regulators had yet to give their blessing. In a conference call from Paris, Publicis Groupe Chairman-CEO Maurice Levy said the delay from China, along with disagreements over the leadership structure and tax issues in the U.K. and the Netherlands, were among several issues leading to the collapse.

As the International Advertising Association's conference opened in Beijing, Omnicom Group was one of the main sponsors. On the day Omnicom contended with the deal's collapse, it was also hosting an after-party for the industry.

The congress, hosted in a conference center near the Bird's Nest Olympic stadium, opened with ceremonious welcome greetings from Chinese authorities.

Mr. Sorrell, who spoke right after those officials, noted that it "took 10 months for people to realize (the merger) it wasn't in the interest of clients," the people employed by the companies or the industry.

Despite the Publicom failure, Mr. Sorrell predicted more consolidation ahead.

Omnicom and Publicis announced their plans in July 2013, predicting the "merger of equals" would be completed by the year's end.

As the months dragged on and the deal failed to come through, marketers got nervous about the uncertainties surrounding the deal, and competitors including WPP and Dentsu Aegis benefitted from new business.

Tim Andree, executive chairman of the Dentsu Aegis Network, said he had been surprised when the Publicom deal was originally announced, and "though there had been some rumors in the markets, we were relatively surprised that it didn't come together."

Mr. Andree, speaking on the sidelines of the Beijing event, said the failed merger shows "these things are hard, and they have to really be driven by what's great for your clients and what's great for you're your employees. And if those things aren't driving it, it's very difficult to bring them together."

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