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.

 

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Richard Pinder launches global network with Maserati as a client

March 26, 2013

Richard PinderAfter years of being a jet-setting senior suit in someone else’s service, Richard Pinder has decided to go global on his own account with the ambitious launch of international network The House Worldwide.

Pinder, it will be recalled, was head of Publicis Worldwide for five years until group succession politics (the imposition of Jean-Yves Naouri as executive chairman) made further tenure of his position unrealistic.

That was two years ago. Since then, Pinder has been pondering how to cash in on his experience with global clients (he’s worked for over 25 years in Asia, Europe and the USA; for Leo Burnett, Ogilvy & Mather and Grey, as well as Publicis) by building a new-model worldwide agency network.

No mean cliché, the cynic will object. We’ve heard the rhetoric before. What’s the reality?

It’s true that the agency world has long been struggling with a “post-analogue” structural solution to the increasingly financially unviable traditional creative agency network, with its army of regional bureaucracies. Some have proffered a solution in the form of the fleeter-footed international micro-network (step forward BBH, Wieden & Kennedy and – in its heyday – StrawberryFrog.

Pinder, however, has gone a step further in presenting a top-down managerial solution – or perhaps that should be management consultancy solution – in place of the piecemeal creative one. His starting point is that the traditional global advertising business – unlike professional counterparts such as lawyers and accountants – loses most of its senior talent to the management of regional geographic fiefdoms, which are there primarily because of historical legacy. What this talent should be doing is servicing the client’s agenda rather than their own corporate one. The exception, where the client really can insist on top-level personal service, is a vanishingly small number of mega-clients, such as Ford and Procter & Gamble, which have specially structured teams to pander to their requirements.

Pinder’s idea is to provide this level of service for global, or at least international, clients further down the budgetary league table. Each client should be serviced by no less than three senior people at any one time. To do this, he has joined forces with a core team of like-minded senior executives: initially, Peter Rawlings, former chief operating officer DDB Asia, Chris Chard, former chief strategy officer of Lowe Worldwide in New York and Ben Stobart, former senior vice-president (chief suit) of Burnett Chicago. These will deal directly with top clients on a day-to-day basis; the specialist skills base, on the other hand, is to be provided by a network of over a dozen associated network companies, of which the best known is Naked Communications (see AdWeek for a full list).

Note the absence of an overall chief creative officer. This is deliberate: Pinder does not believe a single individual can adequately address the creative needs of all client types.

Why is Pinder convinced this model can operate from a single fixed geographical location (well, actually two in THW’s case – London and Singapore)?  Because of consolidation on the brand management side. More and more marketing power is being concentrated into the hands of Chief marketing officers and indeed chief executives; less and less being delegated to regional and country power bases.

But, the acid test is: has Pinder got any clients? Yes he has. He has been collaborating with two over the past year in honing the organisational structure of THW, during what he calls “beta mode” (how digitally au courant).

And they are? Maserati and an upmarket specialist haircare brand, GHD (stands for “Good Hair Day”). Both, he tells me, are poised at an interesting fulcrum of development, from the brand and new product point of view.

Maserati, an ultra luxury sports car marque lodged in the Chrysler/Fiat stable, has been given a €1.6bn injection to broaden its model range and take on Porsche.

GHD – which produces premium-priced hair stylers – is also cash-rich after being bought for £300m by Lion Capital. Lion is investing in npd, with a view to bringing GHD out of the salon and onto the international stage. Inevitably, that is going to involve careful brand positioning as GHD moves into a broader market segment.

However, Pinder is coy on the subject of who, apart from Maserati and GHD, is bankrolling all of this. It seems likely that both principal founders (Pinder and Rawlings) have skin in the game. But a project of this scope is financially beyond most individual investors, even if they are relatively wealthy admen. Private equity seems to the answer. Among the list of network associates is, rather intriguingly, a UK-based hedge fund called Toscafund, whose chairman is former RBS bigwig Sir George Mathewson. Pinder claims Toscafund is very handy on the “analytics” side. No doubt. But my guess is it’s providing a lot more resource than that.


Naouri’s path to the top at Publicis leaves Pinder stranded

March 31, 2011

This week, a famous media-oriented company, family-built yet globally traded, publicly acknowledged its succession strategy. No, it’s not NewsCorp I’m talking of here (though it certainly fits the description), but Publicis Groupe.

It seems that my tentative question of over a year ago – Will Jean-Yves Naouri be the next ceo of Publicis Groupe? – has been strongly answered in the affirmative.

Little alternative interpretation can be placed on Groupe CEO Maurice Lévy’s statement to the Financial Times that Naouri “is clearly in a leading position for winning the race” to taking over as chief executive when he himself departs in “a few more years.”

As it happens, Publicis insiders have long since been placing their bets on Naouri, albeit with a few reservations about his candidature. Like any leader-in-waiting, Naouri has gradually been acquiring the instruments of power. He’s on the Groupe senior management board, he’s its chief operating officer and, thanks to his reputation as an experienced trouble-shooter, he’s been given “special powers” to shore up Publicis’ strategic weakness (relatively speaking) in China.

However, what marks out his transition from heir presumptive to heir apparent is the decision to install him as executive chairman of Publicis Worldwide. This really is entrusting the heir with the crown jewels. It means putting Naouri very much in the public eye, by letting him run a high-profile creative network.

Not any high-profile creative network, either. It is the Groupe’s flagship – quintessentially Gallic yet global – and very much Lévy’s personal fiefdom.

That is certainly one explanation for why, under first Rick Bendel and then Richard Pinder, it has effectively been run by chief operating officers rather than a formal CEO. In effect, it didn’t need one, since Lévy kept a watchful but fatherly eye on its activities.

Publicis has, of course, been here before. In 2006, Lévy poached Olivier Fleurot, a former FT Group chief executive, as executive chairman of the creative network, at the same time that Pinder was brought in as COO. Then, as now, the honorific appointment gave rise to speculation that Lévy was grooming his successor. However, by Spring 2009 Fleurot had moved off the boil (or at least off the board): to head the holding company’s PR operations, leaving Pinder soldiering on alone at Publicis Worldwide – with effective responsibility for the network, but not full empowerment.

This being so, it is understandable why Pinder should choose to quit now. Being British in a top French company is not quite the barrier to top-flight promotion it might appear at first sight – as David Jones’ recent elevation at Havas Groupe demonstrates. Even so, the odds on Pinder being further promoted – despite his successful 5-year tenure at Publicis Worldwide – seemed remote. In effect, the appointment of Naouri was the coup de grâce to his career advancement. It’s a loss for Publicis, too, because the relentlessly itinerant Pinder gave the network a genuinely cosmopolitan aura.

As far as I can make out, the parting has been amicable enough: Lévy appears to have been keen for Pinder to stay on; and was financially generous when it became apparent he would not. Pinder seems to have a clear idea of what he wants to do next, though what that is I do not know.

Anyway, back to Naouri. Is there any reason to suppose that he may suffer the same fate as Fleurot? Not really. For one thing, time is pressing in a way it was not back in 2006. Lévy is now in “extra time” as group CEO, and shareholders will want a definitive solution sooner rather than later. True, Naouri still has to be anointed by the most important shareholder of them all, Elisabeth Badinter (daughter of Publicis’ founder and the single-biggest stakeholder). But that’s beginning to seem more and more a formality as the alternatives ebb away. The job is now Naouri’s to lose, not someone else’s to win.

The more interesting question is: what will happen to Lévy himself when Naouri is formally given the top job. Will he really retire?

As a candidate, Naouri certainly ticks many boxes. He comes from the right French social and educational background. His relationship with Dominique Strauss-Kahn could be invaluable, should the current managing director of the IMF ever run for president (polls indicate he would beat Nicolas Sarkozy). But charismatic he is not.

The possibility therefore exists that Lévy might be asked to stay on in some capacity. Perhaps as lifetime president.


Francis Maude’s Sword of Damocles leaves the COI’s future hanging by a thread

October 15, 2010

Clearly the future of the Central Office of Information, which has been around since 1946, is even more precarious than I – or I suspect its chief executive Mark Lund (left) – had imagined.

Not content with imposing an emasculating 40% cut on the COI’s 737-strong workforce, the Government is now openly toying with the idea of casting its eviscerated carcass onto the bonfire of the quangos.

The decision, which will not be finalised until the end of November, is in the hands of cabinet office minister Francis Maude. Maude’s views on the subject may readily be gauged by his recent actions. He has floated the idea of the BBC airing COI campaigns free of charge – presumably in place of the many self-indulgent programme trailers and cross-channel promotions which now clog our viewing. Indeed, he has gone further. Since media buying would, to the extent that campaigns are aired by the BBC and not commercial channels, become redundant, he has taken the logical step of opening negotiations with WPP over M4C’s £200m centralised media buying contract.

Strip out centralised media buying, and it is very difficult to see what else is propping up the rationale of the COI. Specialised consultancy advice? Increasingly unlikely. Such industry knowledge will be a rare commodity once the organisation has been cut to the bone. And if that is so, the road to dissolution begins to look like a four-lane motorway. As with other quangos facing the axe, any essential functions will be transferred to alternative organisations – here, the bigger-spending departments of state such as the DoH.

All this would be a terrible blow for commercial television (especially ITV, which carries the bulk of COI campaigns). But it is doubtful whether agencies (beyond M4C and the media buying community) would shed anything other than a few crocodile tears. Someone still has to make the ads; and Richard Pinder, chief operating officer of Publicis Worldwide, has made it abundantly clear that his agency for one would be right behind the Maude proposal. Others may be more muted, but it’s unlikely they will disagree with him.

If Maude gets his way, it will be the realisation of a terrible irony. Previous COI ceos – namely Carol Fisher and Alan Bishop – have fought tooth and nail over the past decade, ultimately successfully – to suppress a secession by departments of state.

But will Maude actually go through with it? Don’t underestimate the BBC’s ability to kick up a stink over this: it doesn’t like the Maude Plan any more than ITV, although for a quite different reason. The whole issue threatens to become mired in a heated “public interest” debate, pivoting on the BBC’s impaired political impartiality. What with the brouhaha over BSkyB (to refer, or not refer, Rupert Murdoch’s bid), I doubt that the coalition government will have the stomach to take on an alienated ITV and truculent BBC as well. No doubt about it, though, it’s a thin thread the COI’s future hangs by.


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