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Publicis Groupe and Omnicom disclose $35bn merger

July 27, 2013

Maurice LevyAs merger rumours go, they didn’t come much better. Omnipub. Or more probably Publicom. But let’s come back to that later.

The idea that the world’s number two marketing services group, Omnicom, is about to combine with the number three, Publicis Groupe, and topple WPP from its premier spot (by market capitalisation) eventually proved too much for Bloomberg News. Yesterday, after the New York Stock Exchange had closed, it went ahead and published on the basis of a single source, probably but not certainly a disaffected investment banker.

Hats off to Bloomberg: it got it right. The new entity is to be called Publicis Omnicom Groupe. Fuller details will be announced in Paris tomorrow. But Omnicom chief executive John Wren and Publicis CEO are expected to be joint CEOs of the combined companies. At least, for the time being…

Commentators have rightly fastened upon the many impediments to Wren and Lévy pulling off this $35bn marriage in advertising heaven. They range from anti-trust legislation, to rampant nationalism (Publicis is a French chauvinistic icon, and seen as a bulwark against Le Defi Americain), to apparently unbridgeable divergence in the two companies’ strategies, not to mention the little matter of crippling client conflict.

So that’s it then? It can’t possibly work? Well, no. I can’t speak for the thicket of legal obstacles likely to be thrown in the way of the touted merger, but most of the other objections can be turned on their head, sometimes to advantage.

Let’s take strategy as an example. Lévy is relatively weak in the USA, but has emphasised emerging markets and put his money where his mouth is – sometimes too much of it – with expensive digital acquisitions such as Digitas, Razorfish, Rosetta, Big Fuel and LBi. Wren is archetypally American – over 50% of his business comes from the States; he has shied away from digital acquisitions, which he regards as over-priced, and some (including shareholders) would argue that his conservatism, or complacency, has cost Omnicom dear in the Far East. So different strategies, yes; but incompatible ones, no.

Nor is client conflict the neurotic impediment to mergers in the advertising business it once was. Some clients – McDonald’s, Mars and Procter & Gamble for instance – are held in common by the two groups. The real deal-breaker – if there is one – is likely to be Coca-Cola (PG) and PepsiCo (Omnicom). Then again, maybe Wren knows something about the state of the PepsiCo business we don’t.

Next, might a merger not help to address some chronic succession problems in both organisations? Readers of this news site will be very familiar with those at Publicis. Jean-Yves Naouri, once 71-year-old Lévy’s favoured protégé, seems to have fallen by the wayside. While Arthur Sadoun – the capable, ambitious managing director of the elite Publicis Worldwide network – was probably too young and too little known outside France to assume the global mantle. An added piece in this jigsaw is Elisabeth Badinter, the daughter of Publicis founder Marcel Bleustein-Blanchet, who has been a member of PG’s supervisory board since 1987 and its chairman since 1996.

Badinter will, according to the Wall Street Journal, co-chair the new Publicis/Omnicom entity with Bruce Crawford. But she is expected to retire at the end of 2015. Which would be a convenient moment for Lévy to metamorphose into an emeritus role. It might also be a convenient moment for Badinter to bow out and cash in an enormous cheque. She is a 9.1% share holder in Publicis Groupe.

John WrenTurning to Omnicom, the problems of its senior management are less well ventilated. But two things are certain: its directors are not getting any younger and there hasn’t been much mobility lately. The average age of the board is over 70 (my thanks to Bob Willott for this pop-up statistic), making 61-year-old Wren look a comparative spring-chicken. Omnicom remains a well-run company, but there is an unmistakable air of geriatric stasis hanging over it. It has lost some big, perennial, brands in the recent past: Gillette and Chevrolet. Another signature account – Anheuser-Busch – has been cut to ribbons by the cost-conscious Boys from Brazil (InBev). By contrast Publicis – for all its chief’s distinguished grey hair – is viewed as dynamic; a perception reflected not only in PG’s recent stellar results but its consistently superior stock market rating.

A “nil premium” merger (which is what Bloomberg has suggested this is) implies a combination of equals. In reality, although Omnicom is the larger company, Publicis will end up in the driving seat: we’re talking Publicom rather than OmniPub. The signs are already there: in the name, Publicis leading; and in the venue for the announcement tomorrow, Paris.

The important detail to look out for will be who becomes chief financial officer. My money is on Jean-Michel Etienne rather than Randy Weisenburger. It’s not only the French who have to be appeased, it’s also the investment community.

Bloomberg seeded one of the most galvanising “silly season” rumours in years. The only thing is, it turned out to be true.

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A successor to Maurice Lévy as head of Publicis Groupe? Yes, but no, but maybe

July 24, 2012

These days, we’ve come to see Maurice Lévy, chairman and chief executive of Publicis Groupe, as something of an oracle. Every time the 70-year-old eminence grise makes one of his ceremonial public appearances – ostensibly to observe the religious rites of the financial year – we strain our ears for words of greater meaning, expertly hidden between the monotonous reporting lines.

This year’s halfway performance was no disappointment. In themselves, the figures were not terribly exciting. Organic growth of 2.8% and a 19% uplift in income were a perfectly respectable outcome, given that the Eurozone economy has developed blackspot and Publicis had lost the General Motors account. Clearly the BRICs and MISSATs (as we must now refer to Mexico, Indonesia, Singapore, South Africa and Turkey) must be doing rather well to make up the averages. And – hidden gem – Britain seems to be uncharacteristically up among them – for now at any rate – since it posted a 4.1% increase in growth.

But all this numerical incantation was historical stuff, and not what we actually wanted to hear.

What was M. Lévy’s outlook for the global advertising economy? The downward trend between the first and second quarters would halt. Much higher growth could be expected in the third quarter, starting right now. Phew!

And what of Dentsu’s acquisition of Aegis Group, what did he think of that? “The price is extremely full,” he opined in true oracular fashion. “It’s a nice acquisition for Dentsu.” But not for anyone else, we were led to believe. Not at least for anyone with a head for figures. And certainly not for Publicis Groupe, which had done something infinitely more sensible with a full buyout of BBH.

And the Publicis Groupe succession (which is all we really wanted to hear about) – any progress on that? Here M. Lévy outdid himself in Delphic obscurity and double meaning. Yes, a successor to himself would emerge. In September. Or was that just the beginning of the process? It rather looked like it: “In September the board will start the process.” Hold on a minute, hadn’t this “process” been going on for several years now? Why did it need to “begin” in September?

But, a successor would be found, wouldn’t he? Think of those poor clients and investors waiting anxiously for reassurance.

Yes, M. Lévy had his preferred private candidate, but he wasn’t going to disclose their identity to anyone else. That was a matter for the board.

So, we’ll take that as full confidence in Jean-Yves Naouri, PG’s chief operating officer  and Publicis Worldwide CEO whose name Lévy had let slip during an earlier ritual occasion? Well, possibly. Unless that successor were to be Arthur Sadoun, managing director of Publicis Worldwide. Or maybe Simon Badinter, son of its most important shareholder, Elisabeth Badinter – without whose approval no Lévy successor can be anointed.

But we could be clear on one thing, couldn’t we – M. Lévy himself would be vacating his See? Ah! Well, yes and no: “The first and most important thing is the depth and breadth of the teams at Publicis is such that my presence is almost non-important. I think it’s very important that there’s a succession plan and I’m doing everything I can, with a fantastic team, to make sure that no one who entrusts us with their confidence will be disappointed – our clients, our people, our investors,” he said with studied contradiction. Someone “almost non-important” needs a successor, eh?

Let’s get this straight then. A candidate does exist. It’s Jean-Yves Naouri, who has been working like a Stakhanovite to prove his mettle. But doubts remain about his suitability. Is La Badinter any more enthusiastic about “the approved candidate” than when his name first emerged over two years ago? Probably not, but she’s going to have to face up to reality soon, because there’s no obvious alternative to Naouri in the wings. Unless, of course, we’ve been barking up the wrong tree here. Perhaps there won’t be a single successor. Maybe Naouri will be installed with a junior partner at his side – conceivably the more charismatic Sadoun. And just to be absolutely certain the glue sticks, Maurice Lévy won’t be leaving any time soon. He won’t be président directeur-général any longer, of course. Just life president. After all, the one thing he did unambiguously tell us was: “It’s my life and I don’t intend to simply leave the company. Whatever happens to me I will always support Publicis and help Publicis as long as Publicis will need me; in whatever capacity Publicis will need me. And that is clear.”

Yes, for once, it is.


Maurice Lévy bats Naouri’s leadership credentials into the long grass

July 22, 2011

Jean-Yves Naouri has a great future behind him as the next leader of Publicis Groupe. Don’t just take my word for it. Check out Publicis’ H1 earnings call, which group chief Maurice Lévy used as a platform to “deep-six” Naouri’s much-touted candidature into the long grass.

Naouri, it will be recalled, had acquired much of the symbolism of a leader-in-waiting: explicit blessing by Lévy but, more materially, a special executive role to sort out the group’s muddled affairs in China. And, most recently, he has added to this list with his appointment as executive chairman of Publicis Worldwide, the group’s most prestigious network; an event that triggered the resignation of long-serving chief operating officer Richard Pinder.

Lévy is now regretting his earlier enthusiasm. Either that or the all-powerful supervisory board, headed by principal shareholder and daughter-of-the-founder Elisabeth Badinter, has rejected the graft.

At all events, Lévy has made it abundantly clear he is looking at alternatives. According to AdAge, Lévy is spending time with “a few people” without letting them know he is monitoring them (that bit I rather doubt): “I’m training more than one person because I don’t want only one horse in the race. It is my responsibility to give the board many options,” he tells us.

Who might these dark “horses” be? Two candidates come to mind.

The first is Arthur Sadoun. Sadoun, about 40, has been president and chief executive of Publicis France for some time but, in a highly significant move this spring, his role was expanded when he was elevated to managing director of the network – with direct responsibility for operations in Western Europe (meaning Germany, Austria, Switzerland, Spain, Italy, Belgium and Holland as well as France).

Sadoun ticks many of the boxes for Publicis leadership. He is a quintessential part of the moneyed, French elite. A graduate of the European Business School and an INSEAD MBA, he is also admirably well connected – not least through his glamorous wife Anne-Sophie Lapix, a leading French television presenter.

That may make him sound like a Naouri clone. Not so. Sadoun is also an accredited entrepreneur and an adman of some flair. After graduating from EBS in his early twenties, he moved to Chile where he set up his own agency – later sold to BBDO. Returning to France in 1997, he joined TBWA\Paris and in 2003 became CEO. Under his management, TBWA\Paris received the Cannes Lions International Advertising Festival ‘Agency of the Year’ Award 4 years in a row. Spookily, he replicated this success with Publicis Conseil – to which he made a sideways move in 2006 – for 3 years running. Say what you like, M. Sadoun is a man who gets things done.

That’s my 7/1 on bet. A darker horse still – say 19/1 – is Simon Badinter. Badinter, 43, comes enormously well pre-packaged as the aforesaid Elisabeth Badinter’s elder son. Badinter mère is married to eminent lawyer and former justice minister now senator Robert. Besides being the company’s heavy-hitting shareholder, she is an intellectual celebrity in her own right. (A point she would no doubt heavily underscore, being one of France’s leading feminists to boot.) Nepotism in a French public company is not the barrier to advancement it might be in Anglo-Saxon economies (the Murdochs being the trying exception to prove that rule). A fact perhaps reflected in Simon Badinter’s long-term presence on Publicis Groupe’s supervisory board, despite his relative youth.

Against him, his hands-on experience is hardly the match of Sadoun’s, or even Naouri’s. He was installed as chairman and chief executive of Medias & Regies Europe – Publicis’ airtime and space sales house – in 2003. But a good deal of his time since has been spent in the USA, to the extent that he was recently made a US citizen. Earlier this year, he handed over his M&R Euro responsibilities to kid brother Benjamin, 40, and took on US duties in their place. To cap this Yankophilia, Simon is an enthusiastic amateur radio star. He recently quit as host of “Simon Rendezvous”, a Sunday night slot broadcast by Chicago-based WGN-AM, to take up a similar role at Boston’s WTKK-FM.

So, Lévy does indeed have “options” other than the colourless Naouri. What he will do with them remains to be seen. He himself seems keen not to outstay his extended welcome: “My board would like me to stay for a full term (ie 4 more years), which is not something I am prepared to do. I prefer for it (the settlement of the succession issue) to happen now.” Well, not now perhaps, but very soon. Lévy, as he has hinted, would like to sort out the vexed issue of the 10% or so of the company still owned by increasingly disconsolate Dentsu. A share buy-back early next year seems on the cards.

Then he can go. If he really wants to.


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