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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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P&G’s Gillette strategy? Blame the messenger with a $150m account review

September 18, 2012

It seems Gillette advertising is the best a man can get not after all. Not at least when that man is Procter & Gamble Brand-Building Officer Marc Pritchard. Pritchard has just put the North American shaving, deodorant and body wash business up for review, which at a spend of $150m last year (according to Kantar) makes it the kernel of the Gillette worldwide business.

That, by the way, will also be up for review quite soon, and must be worth upwards of $300m in total.

In the world of advertising, this is a seismic event. BBDO has handled the Gillette account for ever. Or, to be a little more precise about the matter, since 1966 in America, when it bought the Clyne Maxon agency, which first won the business in 1931. In 1989 BBDO devised one of the most famous advertising tag lines of all time: The Best A Man Can Get. And in 2005, it successfully hurdled perhaps the biggest agency relationship crisis it had ever faced when P&G acquired the formerly independent shaving products company for $63bn, yet decided to retain BBDO as its global agency – despite it never having appeared on a P&G roster previously.

So why a review now? Why at all in fact? After all, highly public account reviews of this kind  – it’s going to last up to 6 months according to P&G – are as rare as hens’ teeth on Planet Cincinnati.

Naturally enough, P&G is playing down the significance of the review. It’s only a chunk of BBDO’s advertising contract that is under threat, they say – not Braun, not the Venus ladies range, not the media account. As if Hamlet could somehow continue to play without the presence of an insignificant character like the Prince. And they are at pains to reassure us that BBDO advertising is still “good” (according to Patrice Louvet, president global grooming and shave care). But, and here is the kiss of death for the Omnicom-owned advertising network:  “We believe there’s an opportunity to be even better and, importantly, to better integrate the product proposition with the overall idea.”

Let’s unravel all the marketing-speak for a minute. BBDO and its sister below-the-line agency Proximity are going to repitch for the business: sure they are, but with what chance of success? The present advertising stinks, is P&G’s subtext.

P&G has been losing share in some very trying market conditions. There’s a recession on out there. People are thinking of value for money but what they’re seeing in its place is an overpriced top-of-the-range Fusion razor system and a fading mid-market legacy brand, Mach 3, that’s being out-priced and out-promoted by Schick. Gillette’s ace in the pack is innovation: it prides itself on being able to charge its customers more for (literally) cutting-edge razor technology. A replacement for Fusion is coming up – probably in 2014 – and Cincinnati has got the jitters. If Fusion Plus (0r whatever it’s going to be called) doesn’t come up with the premium-priced goods, then P&G shareholders are going to be really unhappy. So, it’s time to blame the messenger – or at any rate keep him mean and keen with an extravagant display of market disciplining.

Wieden & Kennedy – the agency that can do anything, including handling Tesco, these days – is the roster favourite to win the account. But don’t underestimate Andrew Robertson, President and CEO of BBDO Worldwide, as he rises to the account challenge of his career.


Why sponsors won’t be dribbling away from John Terry. Unless…

January 31, 2010

Among the many footballing clichés pithily describing the dilemma of putative England captain John Terry my favourite is “Own goal”.

Perroncel: Single outing

Terry was poorly advised in applying for an all-gagging superinjunction on the grounds that the revelation of an adulterous affair with lingerie model Vanessa Perroncel might harm his “financial affairs”. It was another example of a bad call by celebs’ favourite law firm Schillings, which has been in the forefront of blunting freedom of expression through the exploitation of privacy laws that operate under Article 8 of the European Convention of human rights. Last December, Mr Justice Eady was widely ridiculed for the absurdity of an injunction which forbad sexual athlete Tiger Wood’s naked anatomy being taken in vain. And Schillings were the people who brought it before him. This time, they were less lucky in the choice of judge presiding over the case. Sir Michael Tugendhat seems, on reflection, to have taken a dim view of an orchestrated cover-up designed to protect the financial interests of an erring footballer.

Anyway, back to Terry. Presumably it was his estimated £4m-a-year sponsorship money he was concerned about rather than the £200,000 a week he earns as Chelsea captain. If so, he had – and I suggest has – little to fear on that account. Samsung, Nationwide, Umbro and Terry are all in this enterprise together.  I have no idea whether it is the stern disciplinarian or the shrewd pragmatist in England manager Fabio Capello that will win out as he reflects on Terry as a fit and proper symbol to lead England. And in the event it doesn’t much matter. Even if Terry is “demoted”, he will still be on the front bench – which is status enough for his sponsors to keep faith.

Ah, but what about the example of Woods, you say? Once it became apparent the golfing legend was guilty as charged of multiple adultery, Accenture and Gillette jumped ship. Even Nike, which continued to back its man, has begun to withdraw support.

The important difference between these two cases is contained in the word ‘multiple’. So far as we know, Terry has only had one extramarital affair. Woods, on the other hand, quickly became overwhelmed with an avalanche of revelations which effectively forced his withdrawal from public life. With no further glory on the links in prospect, sponsors became disillusioned. I doubt they will feel the same about Terry’s singular excursion from the straight and narrow. Unless, of course, there’s something he hasn’t told us yet…


Pinning the donkey’s tail to Eady’s ass

December 14, 2009

The appropriately-named Mr Bumble, in Oliver Twist, first coined the phrase “the law is an ass”. Charles Dickens stopped well short of naming names, however.

These days we are more fortunate in being able to pin the donkey’s tail on someone’s posterior: that of Mr Justice Eady. Eady has emerged from the lofty otherworldliness of his profession to deliver some judgements of stunning asininity over the past couple of years.

I don’t often find myself in agreement with Paul Dacre, editor in chief of Associated Newspapers. But last month I was prepared to let bygones be bygones when he castigated Eady for his “arrogant and amoral” judgements which were “inexorably and insidiously” imposing a privacy law on British newspapers.

You’ll probably need no reminding that it was Eady who found in favour of Max Mosley, former president of the FIA motor racing body, in his privacy case against the News of the World two years ago. To let Dacre paraphrase: Eady “effectively ruled that it was perfectly acceptable for the multi-millionaire head of a multi-billion sport followed by countless young people to pay five women £2,500 to take part in acts of unimaginable sexual depravity.”

And it was Eady again who got a proper wigging from the appeal court after his manifestly biased judgement favouring foul-mouthed newspaper baron Richard Desmond in a libel action against Desmond’s very unauthorised biographer, Tom Bower. In July, the appeal court found that Eady’s decision was “plainly wrong” and risked “a miscarriage of justice”.

All too easily we might believe it was Eady who decided on the utter propriety of gagging newspapers from reporting a parliamentary question about the ne’er-do-well dumping activities of Trafigura off the Ivory Coast – during the so-called super-injunction affair. But I’m told that is not true. Eady did not on this occasion have to be consulted, although I have little doubt where his sympathies would have lain had things got that far. There are plenty of other examples of “Eady’s Law” which help  to confirm my worst suspicions.

Lewd and suggestive?

But here’s the real corker. Eady has now awarded Tiger Woods an injunction which bans anyone from publishing pictures of the golfing legend naked, or with any parts of his body exposed. Theoretically, that would exclude just about every publicity picture ever taken of Woods in his golfing kit; and certainly most of the stuff on his own website; it would exclude those semi-naked and oh-so-lewd shots of Wood shaving himself in the Gillette ads; and all that bare-armed stuff about being a Tiger in the Accenture campaign (not, of course, the reason why these two sponsors are dropping him). Surreally,  a pompous covering note attached to the injunction states: “For the avoidance of doubt this order is not to be taken as an admission that any such photographs do exist, and it is not admitted, any such images may have been fabricated, altered, manipulated and or changed to create the false appearance and impression that they are nude photographs of our client.”

True asinine gibberish. I bet teeth are really chattering at the (extra-jurisdictional) National Enquirer after reading that.

Eady is apparently puzzled and upset at the negative publicity he is receiving, in just the same way that Brian Hutton was puzzled and upset at criticism for the wrong-headed conclusions he drew from his eponymous Inquiry. These people don’t seem to understand that they live within an open society, not above it. O tempora, o mores.


P&G colossus steps aside

June 10, 2009

AG LafleyThis week, one of the great captains of industry over the past decade has announced he will soon be stepping aside. Alan (better known as AG) Lafley will remain chairman of Procter & Gamble, but is handing over the management reins to a new chief executive officer, Robert McDonald.

Although Lafley’s relative youth (he is only 62) has raised eyebrows about the timing of the transition, the beneficiary of it is no surprise. McDonald, 55, is chief operating officer and, like Lafley, a P&G veteran – in this case of 29 years. Personal chemistry between the men is good (they both, for example, share a military background) and Lafley has long groomed McDonald as his successor. For the avoidance of any doubt as to who was going to succeed Lafley, the only other competitor – Susan Arnold – announced she was quitting back in March.

Almost without saying, Lafley will be a very hard act to follow. I wouldn’t go quite so far as to say he found some brick rubble and turned it into a marble palace, but not far off. P&G was in a serious mess when he took over in 2000. His predecessor, Durk Jager, had caused near mutiny in the company by attempting to introduce a policy of accelerated corporate transformation while failing to take his team with him. In an unprecedented act at P&G, he was shown the door within 18 months.

Admittedly, it would hard to be less consensual than Jager, but Lafley is certainly a lot more emollient, scoring highly on people skills. That alone wouldn’t account for his reputation. It is the strength of his strategic vision, and the way he has calmly, methodically, implemented it that distinguishes him. To combat the classic problem facing multinational consumer goods companies – declining margins in advanced economies, and increasing competition from own-label – Lafley drew up a multi-layered plan.  One element was to play to P&G’s traditional strengths: enhancement of margin through added-value innovation. Lafley has completely overhauled, and to good effect, P&G’s approach to innovation, opening up closed “Proctoid” culture to outside inventors.

More dramatically, he has sought to boost P&G profits by moving much further into higher-margin areas, such as beauty and male-grooming products, through a series of high-profile acquisitions. Notably, the company acquired Clairol and Wella. However, if there is a single act for which Lafley will be remembered, it has to be the $57bn acquisition of Gillette. This was a headline-catching event in itself, which has played a significant role in underpinning Lafley’s boast that he has more than doubled P&G’s sales during his tenure. But it is more than that. Gillette has given P&G – a company almost exclusively concerned with the female mindset – a strategic insight into male buying behaviour.

At the close of Lafley’s reign, P&G is once again facing some of the problems which beset it at its inception. Consumers in a recession value cheapness over added value and act accordingly. In May, P&G issued a sharply lower earnings forecast for the next fiscal year, starting July 1 – the day Lafley steps down.

As a complement to Lafley’s drive towards higher margins, his successor McDonald has played a major role in shifting P&G’s manufacturing capability to more fruitful, and less expensive, emerging economies. McDonald will no doubt have to tidy up some loose ends, like disposing of the more peripheral Gillette brands, namely Duracell and Braun. But it is doubtful whether he will be deflected from Lafley’s strategy in any major way. Once the recession is over, consumers will come back to the added-value proposition.

If you want a final perspective on Lafley’s tenure, benchmark it with that of Niall Fitzgerald and Patrick Cescau at Unilever during the same period.


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