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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Will GM’s Manchester United sponsorship deal shift more Chevies?

May 31, 2012

For years the auto industry has been asking: how long before the Vauxhall marque becomes Opel? Maybe the question now needs rephrasing: how long before Opel becomes Chevrolet?

Certainly Opel becoming – in the fullness of time – Chevrolet would be one logical outcome of the sponsorship deal its owner, General Motors, has just struck with British Premier League football club Manchester United.

But that’s just a side-light on a global marketing communications strategy that actually has very little to do with Europe, where Chevrolet accounts for only 1.5% of total car sales. Symbolically, the sponsorship agreement between GM and Manchester United has been inked in Shanghai. Recent research by Kantar found that over half of Man U’s estimated 659 million fans worldwide are to be found in emerging markets, such as the BRICS. That is exactly where GM is targeting most growth for its prime brand, Chevrolet.

All very fine, you may say. But isn’t this just another example of fame-hungry GM global marketing supremo Joel Ewanick grabbing the headlines? And a costly one too, which may not eventually stack up. After all, what traction does a British football club – even one whose brand has achieved substantial recognition in the rest of the world – have in the market where Chevy currently sells most of its 4.76 million units a year? Not that much really (despite Kantar’s projection of  a 35 million Man U following in the USA – who are these people?).

Some might go even further and claim Ewanick and GM are actually being unpatriotic. What this sponsorship deal is really about is cocking a snook at America’s prime sport, baseball: Ewanick has personally decided that Super Bowl ads are too expensive (at $3.4m for 30 seconds prime time, a not unreasonable point of view) and he’s perversely made his point by concluding  a deal with a sport that cannot have any discernible uplift on US sales in the immediate future. Nor is this an inexpensive gesture. Recent sponsorships deals with Man U have not exactly cost peanuts. In 2010, for example, the club struck an agreement with insurance firm Aon worth £80m ($125m) over 4 years.

There may of course be a grain of truth in these objections. Ewanick’s behaviour is clearly tactical as well as strategic in intent. It is designed, at one level, to bring the Super Bowl ratecard (and let’s throw in the Facebook ratecard while we’re there) to heel by demonstrating there is a marcoms alternative. But a tactic is exactly what it is. My betting is he cannot afford to boycott either platform in the longer run.


Mother’s $600,000 Chevrolet campaign triggers SEC conflict of interest inquiry

May 26, 2012

These days, General Motors advertising seems more adept at making the headlines than selling metal.

Yesterday, GM was forced to report to the Securities and Exchange Commission, which regulates the corporate governance of publicly-quoted companies, that it had inadvertently awarded a $600,000 ad contract to an agency where the wife of GM’s chief financial officer, Dan Ammann, is a partner.

The agency in question is Mother New York, and the brief was Chevrolet’s 100th birthday anniversary (see below), which ran last autumn. Ammann’s wife, Pernilla Ammann, is both a partner and chief operating officer at Mother New York.

Apparently, evidence of a conflict of interest only “popped up” last week when the governance committee of the board of directors was reviewing GM contracts.

GM directors are contractually required to disclose personal ties to outside companies, which Dan Ammann signally failed to do.

Now, I know what you’re going to say. How could GM have committed such an obvious oversight? The clue’s in the name, isn’t it? “Ammann”, on the Mother head sheet, partner, pretty unusual, sounds a bit like our CFO’s. Could they by any chance be related?

But of course, bureaucracies (which is what all multinational companies are) don’t work like that. They don’t make lateral connections; they function efficiently only in silos. So, though it took GM a long time to recognise the oversight, and though the oversight is worrying in itself, the fact that it happened should not surprise us.

What I’m more interested in is what Mrs Ammann was doing all this time (apart from keeping mum). Did she never mention over the K Flakes: “Honey, the strangest thing happened. Your company has just offered our agency a nice little advertising brief”? Admittedly she may not have worked on the brief, but she must have known about it. It would have been irresponsible of an agency COO not to have. After all, one of her jobs is to handle legal issues and “contract negotiations”, according to the agency website. One thing is for certain: she can hardly have been so naive that she didn’t know what constitutes a conflict of interest.

Maybe she’s estranged from her husband. Maybe she doesn’t talk to him at breakfast, or at any other time. In which case, I think we should be told.

In any case, there’s always email.


McCann and Goodby to work together on global Chevy brief, but how harmoniously?

March 28, 2012

Once again, General Motors CMO Joel Ewanick has demonstrated his ability to surprise and to innovate, with the announcement of his “Commonwealth” solution to the global Chevrolet creative account.

GM spent $4.7bn on advertising last year, and the majority of that was channelled through Chevy, a brand accounting for 70% of GM’s US sales. So, all eyes will be on what Ewanick, after much agonising, has done with one of the world’s largest creative accounts.

Which is, exactly? The easy bit is that he has fired most of the 70 agencies that were, somehow, somewhere, working on the account – superfluously bloating management and production costs.

More controversially, Ewanick has placed the two winning agencies, Goodby Silverstein & Partners and McCann Erickson, in a joint venture dubbed Commonwealth. It will be based in Detroit, home of GM, but have 3 other creative hubs dotted across the globe at Milan, Mumbai and Sao Paolo. And the controversial bit is that the two agencies – Goodby, which holds the Chevy business in the USA, and McCann, which is strong in Latin America, Mexico, China and Canada – are owned by rival ad holding companies, Omnicom and Interpublic Group respectively. Omnicom and IPG are 50/50 owners of Commonwealth, we are told, but profits will be allocated “geographically”.

That in itself may be cause for friction. But just as interesting is who and what will be running Commonwealth day to day. It is to be led by an eight-strong “global advisory board”, overseeing creative initiatives and strategy, which consists principally of Jeff Goodby, the Goodby Silverstein & Partners founder, who will be creative chairman, Washington Olivetto, McCann Worldgroup Latin America chairman and chief creative officer, Linus Karlsson, the McCann New York and London chairman, and chief creative officer and Prasoon Joshi, the chairman of McCann Worldgroup India. A hat-tip to Goodby’s creative eminence, but note McCann’s dominance on the board.

Now, before muttering “sacks” and “cats”, let’s all take a deep breath and peer long and carefully into the glass half-full. There certainly is a rational case for Commonwealth, or something very like it. And part of it is saving an estimated $2bn in production and management costs over 5 years.

What’s more, we can expect some unwonted co-operative zeal from the two rival agencies. Both will be hugely relieved they have landed the business.

Goodby started as early favourite, not least because it was hand-picked for the US business by Ewanick himself. But  the work has disappointed. And, despite the pleasing publicity surrounding the Ford-knocking Silverado spots at this year’s Super Bowl, there have been gnawing doubts at the Goodby office about the agency’s ability to retain the account.

McCann, on the other hand, desperately needed a coup of any kind to stabilise its faltering performance. True, this is not the outright win that leaves it the undisputed global agency of record earlier rumoured. But it’s a fairly decent outcome, which consolidates McCann’s already strong position in high-growth emerging markets.

But once the novelty has worn off, what then? Will the creative dream-team pull together to make Chevrolet’s global message more consistent, or will the nightmare of agency politics take over? It’s anyone guess. For that very reason Ewanick should be taken at his word in describing Commonwealth as “historic”. We’ll find out soon enough how deep Chevy really runs.


After all that, Joel Ewanick awards $3bn GM global media account to – Carat

January 24, 2012

It seems the keeper of the world’s third largest advertising budget is a bit of a tease. Only the other day Joel Ewanick, General Motors global chief marketing officer, was telling us that, six months into the review, he simply couldn’t make up his mind about where to place GM’s $4.26bn advertising budget. Agencies on tenterhooks. Could there be a last minute reprieve for them?

Aegis Group chief executive Jerry Buhlmann: $3bn Carat win should bring a smile to his face

No there could not. Actually, Ewanick had long since decided to give the largest chunk under review – the $3bn global media planning and buying business (bar India and China) – to Aegis-owned Carat. You read it here first, as long ago as early December.

If there was last-minute anguish over the decision, it more likely related to brinksmanship over Carat’s fee and the administrative nightmare of reducing a media roster of 40 down to a single agency.

That said, another part of the review may prove more of a poser for him. Ewanick has yet to pronounce on who will win creative duties for the mega-billion dollar Chevrolet account (it’s GM’s biggest brand, accounting for over half of vehicle sales). Omnicom-owned Goodby Silverstein & Partners looked safe with the bulk of the account since it was hired on Ewanick’s personal say-so soon after his arrival at GM. But there is talk that IPG agency McCann-Erickson – which already handles Chevy in India, China and Latin America – is destined to become the first Chevrolet global agency of record (ie, the senior partner).

We can only hope that, for the sake of embattled McCann Worldgroup chief Nick Brien, this rumour turns out to be true.

Because there is little solace to be found elsewhere. Universal McCann’s Latin American media business – sizeable and, more importantly, booming – will now be moving to Carat.

It could be worse though, Nick. Biggest casualty by far of the media consolidation (and indeed of the general review) is Publicis Groupe. PG’s media unit Starcom MediaVest has held the dominant US slice of the business since spring 2005 (back then, way before Lehman Bros and Chapter 11, it was worth $3.5bn a year).

Until now, PG has had a very strong year, mostly at WPP’s expense. Starcom managed to wrest the $600m Novartis account from MEC and its Digitas unit recently won the $1bn Sprint telecoms business. But the crushing GM media loss comes on top of other, collateral, damage. Big Fuel, the social media agency which Publicis seems to have acquired partly at Ewanick’s behest (it certainly came highly recommended) has overnight been reduced to a shell of its former self. By the self-same Ewanick’s unhelpful decision to move the GM account – about three-quarters of its income – elsewhere. Gives a new meaning to “Le Défi Americain”, doesn’t it?


Carat in line to scoop $3bn General Motors global media account

December 7, 2011

A strong rumour suggests Carat has scooped the $3bn General Motors global media buying and planning account, which has been under review since August.

If true, this outcome amounts to a huge blow for Publicis Groupe, which services the majority of the account through its media specialist Starcom MediaVest, and – by the same token – a big fillip for Aegis, owner of Carat, the publicly listed company steered by Jerry Buhlmann.

The review, one of the biggest of its kind in the world, was instigated by GM marketing supremo Joel Ewanick as part of a slew of measures designed to tighten up the automobile giant’s worldwide marketing performance.

Before the review, GM used up to 20 media specialists. However, the bulk of the spend – two-thirds in fact – is committed to North America (the Chevrolet, Buick and Cadillac marques), and much of that has passed through Starcom since 2005. Carat, which has been on the GM roster for a slightly shorter period but consolidated its hold during a 2010 review, handles the $500m European business (Opel and Vauxhall). Interpublic’s Universal McCann was responsible for much of the Latin American business.

Although the review was slated as “global”, it did not in fact include GM’s operations in nascent markets India and China. What it did include, according to the briefing notes, was “digital…, SEO and social media.”

If Ewanick has stuck to his word and included these in the consolidated Carat package, his decision will represent a double-whammy for Publicis. Back in the summer, PG boss Maurice Lévy sought to shore up his position in the increasingly important GM digital account by taking a 51% stake in Big Fuel, which holds the North American social media account. The acquisition was aligned under the Vivaki digital unit.

What we don’t know, of course, is how profitable the account will be for Aegis. In their desperation to win an account, media men often allow their competitive negotiating instinct to overcome more rational arithmetical considerations, and pare the margins down to the bone in an all-out attempt to win. That said, a win will do Aegis’ share price no harm at all. And, being on a roll, Buhlmann can expect more clients to put him and his team at the top of their shortlists.

 


Why Joel Ewanick’s Apple comparison is just pie in the sky for General Motors

August 24, 2011

“Feisty” is the word that most often comes to mind when describing General Motors global chief marketing officer Joel Ewanick.

Since arriving from Hyundai (where he held a similar position) last year, the man seems to have barely slept as he implements a whirlwind catalogue of changes. This month alone, while others absent themselves on their summer vacation, Ewanick has reorganised his marketing department and called a review of the $3bn GM global media account.

But restless energy – commendable though it is – should not be mistaken for vision. The limits of Ewanick’s intellectual rigour, although not his soaring ambition, were also on display earlier this month – at GM’s second annual Global Business Conference.

In it, Ewanick made the extraordinary declaration that his goal is to transform GM not into a better car company, but a future Apple.

Nor was this just a rhetorical trope dished out to a friendly audience. He’s deadly serious. “It’s time,” Ewanick said, “To clearly differentiate our brand and align closer to a true global brand like Apple. It’s time for an automotive company to step out and address consumers and their needs in a way that’s never been done before.”

Admirable sentiments of course. But just what does he mean? Technological innovation is integral  to selling cars, but that doesn’t mean the motor sector is in any way comparable to Silicon Valley. And even if it were, rust-belt Motown marques, with their high social costs and Chapter 11 legacy, are not where you would start. Ironically, in fact, the US car brand with the most potential for eye-catching product innovation and design is not American at all: it’s one whose marketing Ewanick has already captained – Hyundai.

But if the future is elsewhere, Ewanick has, in a curious way, scored a debating point about the past. GM is comparable with Apple: but only in the past tense. Back in the fifties, when Americana and US global power were at their height, a new Chevvie or Cadillac was a potent symbol of the consumer dream. It encapsulated the freedom to travel anytime, anywhere worth travelling to, on the interstate highway. So potent was this dream that GM – like Apple today – was the world’s biggest company by market capitalisation. It even became a mantra in US foreign policy: “What’s good for GM is good for America.”

No chance of recapturing that distant eminence, now or in the future. Cars are simply not the must-have consumer products they once were; even in fast-growing economies like China’s – where they may well be viewed as status symbols, but not on the level of fifties America. Who, on the other hand, would not break their neck to acquire the latest Apple iPhone?

It’s possible, of course, that I have misunderstood Ewanick’s apparently ludicrous aspiration. All he was really talking about was the much more modest goal of creating brands with universally accepted global appeal. I don’t think so, though.

What’s certain is that neither Ewanick nor his boss, GM CEO Dan Akerson, is the next Steve Jobs – despite the superficial brand-turnaround comparison.


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