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Publicom and on and on and on

August 15, 2013

Maurice Levy, John WrenNearly three weeks on from the seismic news that Publicis Groupe and Omnicom are to merge and still no end in sight to the discussion of possible permutations.

Not, be it noted, among the clients involved – who are mostly too stunned, or too busy topping up their tans, to react – but within the industry trade press. At AdAge, the merger has virtually gained supplement status with a regularly updated online sidebar.

But pickings are increasingly thin, as the few facts to emerge shear into speculation. My current favourite ramification? Did Messrs Lévy and Wren not consider the impact of their merger on the industry’s premier creative and effectiveness award schemes? It seems they did not, with dire consequences for both the Cannes International Festival of Creativity holding company of the year award and its Effies equivalent. Alas, these hallowed categories, engineered with such care and precision over the past few years, may now be consigned to the scrapheap by the appearance of a juggernaut so colossal that it will  steam-roller any conceivable competition for the heretoafter. Quelle horreur!

Here’s one factoid that may be of more than passing interest. In the four weeks to August 12th, WPP was the only significant loser in market value within a sector that is generally on the upswing. Its shares shed 1.8% in value. I owe this pearl to Bob Willott, editor of Marketing Services Financial Intelligence, who speculates that the back-track reflects investment community anxiety that WPP may embark upon something big and silly as a riposte. In other words, a price-inflated mega-merger.

I doubt it, given that the only acquisition with appropriate critical mass would be Dentsu. Just think about it, but only for a nano-second. For once, Sir Martin Sorrell is likely to play a waiting game. The sole visible benefit of the Publicom merger to clients – in whose name such things are theoretically carried out – is consolidated media buying in North America. Of traditional media, that is. The very thing that may attract regulatory interest. “Big data”? Don’t make me laugh. It’s a smokescreen, though admittedly a trendy one. How much data, exactly, do Omnicom and Publicis own and farm compared to the specialists in the field (from Google downwards)? And, even supposing it were enough, how long will it take to merge the holding companies’ two very different platforms?

One other thing. Who is actually going to run the new show? There are an awful lot of chairmen, current and sequential – Bruce Crawford, Maurice Lévy and John Wren – but who is going to handle the grubby job of steering the global behemoth from day to day? A Frenchman does not seem likely (though a Frenchman handling the finances, that’s another matter) – because of a lack of global projection. Other than Lévy, the only French adman of global standing is, er, David Jones (well, he speaks fluent French and has a French wife). The natural choice might be Andrew Robertson, head of BBDO and indisputably a citizen of the world (he started off in Rhodesia). But maybe I’m in a minority of two on this. How’s your French, Andrew?

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Fallout from the Publicis/Omnicom merger

July 29, 2013

Richard PinderBy Richard Pinder

When first hearing the Publicis and Omnicom merger rumours you could have been forgiven for thinking it to be some silly season gossip.

But as we know POG is not a passing fancy, it is for real. Hats off to Maurice Levy who has consistently shown his ability to be daring, decisive and dynamic just when people least expect it.

So what drove it? And who are the winners and losers? First, two sets of observations:

The announcement was made in Paris, not New York. The Group will be called the Publicis Omnicom Group, not the Omnicom Publicis Group. The revenues of Publicis Groupe are some way below those of Omnicom Group though their market caps are much closer, but it will be a merger 50/50 owned by the two companies shareholders.
After the dust has settled and the merger is done, the silly co-CEO thing is finished with and the company starts to operate normally, the CEO will be John Wren, from Omnicom, the CFO likely to be Randy Weisenberger from Omnicom, the ticker marker on the NYSE will be OMC and largest market for the combined entity will be the USA.

Once the incredulity subsides, you can see the attraction to Maurice and John. And as the above simple summary shows, you can see the game that is being played by both to get the other to agree to the deal. The former gets to show the French establishment what world class really means, a brilliant retirement gig as non executive Chairman of the world’s number one advertising group and without having to go through with the charade of making good his oft delivered promise to Jean-Yves Naouri to be his successor. The latter, within 30 months, gets to run something nearly double the size of OMC today, in seriously good shape in Digital and Emerging Markets, the number one ad agency of the number one spending client in the world – P&G who had only just taken most of their business from OMC – and all without the pain and risk of taking the long road there.

For Elisabeth Badinter it’s a fabulous end to her tenure as Chair of Publicis – seeing the company her father founded in 1926 become number one globally, as well as securing the very strong valuation on her holding that today’s Publicis stock price provides. For a number of senior managers there will likely be the triggering of various unvested options, stock grants and other goodies, not to mention the special dividends, that will mean good will all round. So, off on the August vacances with a spring in their step? Well not everyone…

For a start there is precious little in the announcement about WHY this is better for clients. We can see it’s better for doing deals with the big media partners, old and new. Scale counts there. But when the bulk of the enterprise’s activity is still about finding, creating and executing inspirational ideas to motivate the world’s population to choose one brand over another brand, there is a point beyond which scale can actually be a disadvantage – talent feels lost, ideas get killed by people who have no idea what the clients’ needs are and everything takes too long and costs too much. Well that’s what a large number of large clients have been telling me this past two years since I left Paris as COO of Publicis Worldwide.

There is also the small matter of the $500m savings mooted in the announcement. Publicis Groupe runs lean. Margins are already industry best. So the chances of finding much of the savings there seem slim. It will be interesting to see how the board of BBDO reacts to the likely loss of their top tier international travel rights, or the agencies of DDB cope with tough bonus rules that tie every unit in the company to the performance of those around them, as happens at Leo Burnett or Publicis today.

As a footnote on the winners and losers, spare a thought for those who fought, lost and thought they had won in the long-running soap opera called Maurice Levy’s succession. Just as the game looked like it would soon be over, the sport got changed and everything was different.

It will also be fascinating to see what WPP do about this. They have got used to being the world’s largest and Sir Martin is rarely quiet for long on any topic, let alone one so close to home. Bookies will surely be giving poor odds on a shotgun WPP/IPG or WPP/Havas union.

And me? Well as client choice reduces, the need for new global alternatives will continue to increase. It’s why we started The House Worldwide and it’s why we think it will  be increasingly relevant to clients who want to get back to a world where the client and the brand are more important than the agent promoting it, and where the money is better off going to the talent than to the accountants counting it.

Bigger and smaller, that’s the future of the ad network game.

Richard Pinder is co-founder and CEO of The House International. He was formerly the head of Publicis Worldwide.

 


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.


Cannes awards spat masks war to the needle between de Nardis and Sorrell

July 4, 2013

Mainardo de NardisWPP chief Sir Martin Sorrell has rightly been basking in the reflected glory of the Cannes sunshine. Three successive years, three successive triumphs as holding company of the year at the International Festival of Creativity. It’s the pinnacle moment for a strategy – his own as it happens, but one for which worldwide creative director John O’Keeffe has done all the hard implementation – designed to kick into touch that old myth about Omnicom’s creative supremacy.

Martin, they used to say, has Asia (meaning he’s a shrewd strategist) but John (Wren, Omnicom CEO) has all the brands. Not any more. In the eternal battle for Cannes “statues”, WPP notched up a convincing lead of 2067 points over Omnicom, in number two position with 1552. Publicis Groupe trailed in third place with 989.5 (where did that half-point come from? No idea). Just to rub the triumph in, a leading WPP agency, Ogilvy & Mather, became the first network ever to win more than 100 lions and its Sao Paulo shop was named agency of the year. So now Martin can boast about having the brands, as well as Asia. Which is more than Alexander the Great could ever do.

But when it sounds too good to be true, it usually is. A few days after the festival ended, news that Omnicom was crying foul over the final Lions tally left Sir Martin spluttering into his breakfast of fresh strawberries at Connaught’s. His temper will not have improved on learning the identity of the trouble-fête behind all this mischief: none other than Mainardo de Nardis, CEO of Omnicom’s principal media planning and buying network, OMD Worldwide. Mainardo (pictured) and Sir Martin go back a long way…

More of that in a moment, though. First, let’s get down and dirty with some relatively boring Cannes festival award technicalities. The substance of de Nardis’ complaint is that WPP media company GroupM has massively over-claimed in putting out a statement – last Wednesday – saying it had won 45 awards, more than any other media agency holding company. Not nearly so, according to Omnicom. Thirty of the Lions (i.e., awards) claimed by GroupM are not verified on the Cannes Lions winners’ website.

Doh? Well, a majority of GroupM’s wins should be disqualified because its subsidiary agencies were not specified in the original competition entry. WPP may well have won something, on the creative side, but for whatever reason, failed to catalogue the media achievement. After the wins were announced, according to Omnicom, GroupM assiduously went back to each entrant agency and requested they be listed as the media shop for the work.

“Gaming the system,” says de Nardis, and a clear violation of the Festival’s rules in spirit if not in the letter (Cannes does make allowance for a few genuine oversights, but not wholesale ones). “Rubbish,” responds GroupM: just a few inadvertent errors and when the Cannes deadline for amended entries is published tomorrow (July 5th), all will be vindicated.

OMD, by the way, won 19 awards, which are seemingly confirmed on the Cannes website. So, if we subtract 30 from GroupM’s claimed 45, we can see that OMD has everything to play for.

All this might seem a storm in a teacup to most readers. But fuelling Sorrell’s irritation is some history. Mainardo de Nardis was once a senior WPP executive and the relationship with Sorrell did not end pleasantly.

Specifically, de Nardis headed WPP’s CIA.mediaedge, these days called MEC, before leaving for Aegis in 2006. Ironically, in view of what has come later, it was WPP which accused de Nardis of not abiding by the rules. Indeed, it became so convinced that de Nardis was playing a double game – working for a rival while still on WPP gardening leave – that it issued legal proceedings against him. Interestingly (from a revelatory point of view), the matter went to trial and quite a lot of Machiavellian shenanigans tumbled out concerning de Nardis’ relationship with Marco Benatti, another former WPP executive who was at that time country manager of CIA in Italy. Although they have managed to fall out from time to time, de Nardis and Benatti were (and probably still are) closely tied by family and business interests – for example, they once ran Medianetwork Italia. Benatti was himself the subject of WPP court proceedings, for alleged breach of fiduciary duty in failing to disclose a major holding in an Italian company, Media Club, which he had helped to acquire on WPP’s behalf in 2002. The trial lumbered on until 2008. Anyone interested in the minutiae of these (apparently) dusty events might look here and here.

So, nothing personal in this statues kerfuffle, eh? One other thing guaranteed to pour salt into old wounds is the prestigious Chanel account, recently up for repitch. Incumbent media agency? MEC. Prospective winner (according to the gossip at Cannes, possibly generated by de Nardis himself): OMD. Actual winner, declared yesterday: WPP, in the guise of a new bespoke agency, Plus – which harbours elements of MEC and Mindshare in its media-buying element.


Age cannot wither them, nor shareholders vote them off the holding company board

April 16, 2013

David-Jones---Havas-007Whoever said advertising was a young person’s business? The conventional wisdom is that at 40, most ad executives would be advised to investigate a second career. And at 50, they’ll be positively clapped out and  have “post-economic” freedom foisted upon them whether they like it or not.

Superficially, membership statistics for the Institute of Practitioners of Advertisers (IPA – the UK adman’s trade body) bear this theory out. When I last looked (which was admittedly a while ago, but I doubt the demographic profile has improved), the number of members surviving their 50th birthday was a vanishingly small 6%.

But these are just the worker bees. Look at the nerve centre of the hive – the main board of the world’s leading advertising holding companies – and you’ll find that gerontocracy has never had it so good.

I was forcibly reminded of this the other day by Marketing Services Financial Intelligence editor Bob Willott.

Willott has done a demographic survey of the Omnicom main board and found the average age to be an astonishing 70. In his own words:

The oldest of the 13 board members is the chairman and former chief executive officer Bruce Crawford.  He is 84 and has been a director for 24 years. His successor as CEO John Wren is a sprightly 60 and has served on the board for 20 years.

I have yet to do the arithmetic upon the board composition of other global holding companies, but the most superficial of surveys suggests a similar age-profile, if their chief executives are anything to go by. At WPP Group, there is an evergreen Sir Martin Sorrell – still incontrovertibly ruling the roost at 68; and likely to do so for a good while yet unless shareholders go nuclear over his annual pay review. Interpublic Group chairman and CEO Michael Roth sails imperturbably on at 67, despite repeated attempts by the media to unseat him or sell his company to a rival. And at Publicis Groupe we have the grand-daddy of them all Maurice Lévy – 71 – with no successor in sight, despite repeated attempts to pretend he has found one.

All this looks terribly good for that comparative whipper-snapper, David Jones (pictured above). At only 46, the global CEO of Havas can anticipate at least another 25 years at the helm.



Wren bags $22m in Omnicom stock sale. Roth to sell $4m IPG shares

March 20, 2012

Omnicom president and CEO John Wren has just sold a lot of shares in his own company. Interpublic Group chairman and CEO Michael Roth is about to do the same.

What is it that they know, and we don’t?

First, some background. Wren sold 258,110 Omnicom shares, worth $12, 549,308 on March 9, according to an SEC filing – leaving him with a total of 1,127,721 shares. The sale represents about 19% of his total holding. In fact, that’s not the full picture, because he also exercised some stock options. The full amount realised appears to be nearer $22m.

Roth’s transaction, which will be executed on April 2, is slightly more modest. He’s selling a mere 324,341 shares which, at today’s prices, would net him about $3.85m.

It’s important to note that director share sales (or “insider trading” as it’s misleadingly called in the USA) are not always what they appear to be. CEOs of publicly listed companies have to act with extreme care when liquidating any of their company portfolio, partly to achieve tax efficiency, and partly to avoid spooking the stock exchange (not to mention shareholders) by seeming to offload too many shares at once.

Roth, for example, normally rebalances his IPG holding every year by buying as well as selling stock. That said, I do not see any evidence of him purchasing stock in 2012 – thus far. Indeed, he currently appears to hold the minimum IPG portfolio permitted to him under company rules. That is, shares valued at five times his basic salary.

So, it would appear he is cutting down at a time when IPG’s share price is nearing a high of about $12. Last September, it was in an all-time pit of $7.93, but IPG has been buoyed by a good trading performance of late.

With Wren, the telegraphy seems much clearer. He’s selling a lot of his stake in the company at one time, no two ways about it. Nor has he bought any Omnicom shares over the last year. In fact, no one insider has. Well, almost no one: a mere 500 shares for a total of $20,583 have been acquired.

If I were a securities house analyst, I might cynically conclude we have a “sell” signal here. Though I hope I am wrong about that.


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