The advertising titans, behind campaigns like ‘Got Milk’ and ‘Priceless’, aim to create the world’s largest ad agency.
Omnicom is buying Interpublic Group in a stock-for-stock deal that will create the largest ad agency in the world with combined annual revenue of almost $26bn.
The deal, announced on Monday, could attract regulatory scrutiny as it seeks to merge the world’s third-largest ad buyer, Omnicom, with the fourth-largest – Interpublic.
The names may be unfamiliar to many Americans, but some of their marketing campaigns are iconic. Those include “Got Milk” for the California Milk Processor Board, “Priceless” for Mastercard, “Because I’m Worth It” for L’Oreal and “Think Different” for Apple.
The combined company will be worth more than $30bn.
“Through this combination, we are poised to accelerate innovation and harness the significant opportunities created by new technologies in this era of exponential change, said John Wren, chairman and CEO of Omnicom. “Now is the perfect time to bring together our technologies, capabilities, talent and geographic footprints to bring clients superior, data-driven outcomes.”
The company will keep the Omnicom name and trade under the “OMC” ticker symbol on the New York Stock Exchange.
Competing for ad dollars
Tech giants such as Alphabet-owned Google and Amazon.com have in recent years attracted marketing dollars away from traditional agencies by offering both advertising tools and marketplaces to buy and sell them.
Soaring use of AI tools that allow businesses to create ads cheaper and faster has squeezed traditional agencies, forcing them to scramble to develop similar in-house tools to retain clients.
“This move allows us to take control of our own future rather than wait for technology to impact it in ways that you can’t anticipate today,” Wren said.
The size of and reach of the new marketing giant will have multiple advantages, including the use of new technologies like artificial intelligence.
“We estimate both companies have an approximately 50/50 split between advertising and marketing services, setting up a strong position not only in creative and media, but also across areas like specialty healthcare, experiential, and PR,” wrote JPMorgan analyst David Karnovsky.
“For the industry, some amount of consolidation is a positive following a couple years of divergent growth among agencies and ahead of an investment cycle for Gen-AI,” Karnovsky added.
Shareholders of the Interpublic Group of Companies Inc will receive 0.344 Omnicom shares for each share of Interpublic common stock that they own. Omnicom shareholders will own 60.6 percent of the combined company and Interpublic shareholders will own 39.4 percent after the transaction is complete.
Wren will be chairman and CEO of Omnicom, while Phil Angelastro will continue as executive vice president and chief financial officer. Interpublic CEO Philippe Krakowsky and COO Daryl Simm will be co-presidents and chief operating officers at Omnicom.
Three current members of Interpublic’s board, including Krakowsky, will join the board of Omnicom.
The deal is expected to have annual cost savings of $750m and is expected to close during the second half of next year. It still needs the approval of Omnicom and Interpublic shareholders.
Regulatory roadblocks had forced Omnicom and France’s Publicis Groupe SA to call off their $35bn merger in 2013.
Shares of Interpublic jumped 10 percent Monday, while Omnicom’s stock fell more than 6 percent.