GODDIE OFOSE writes that merger talks between Omnicom/Publicis, which lasted 18 months without agreement, have blown the lid on the main reason advertising agencies hesitate to collaborate; even as oil and gas, banking, insurance and telecommunications thrive on mergers and acquisitions.
Disagreement between Omnicom and Publicis, two of the world leading advertising and communication agencies, led to the failure of efforts to create the world’s biggest advertising group.
The proposed $35 billion merger between Omnicom, based in the United States, and French rival Publicis, was called off as the challenges in forming the world’s largest advertising agency proved too immense for the partners.
The deal – heralded in July 2012 as a merger of equals that would vault the two agencies into a more digital age – foundered on issues ranging from its complex tax structure to the firms’ divergent cultures.
However, the biggest issue that caused the deal to crash is said to be the position of chief financial officer.
Omnicom Chief Executive Officer (CEO), John Wren, said “there was no one factor. There are a lot of complex issues we haven’t resolved.
“There are strong corporate cultures in both companies that delayed us for reaching an agreement. There was no clear finish line in sight.”
With the merger off, the companies have surrendered their potentially dominant position to current leader WPP.
“The decision to discontinue the process was neither pleasant nor an easy one to make, but it was a necessary one,” explained Publicis CEO, Maurice Levy.
It was widely reported that Insight Communications was going to be the bigger gainer if the deal had sailed through.
Publicis had concluded plans to sever its relationship with Rosabel in the hope that the merger would team up with Insight Communications to get a bigger patch of the Nigerian market.
The aborted merger throws up many questions why advertising agencies prefer affiliation to merger and acquisition, even within the local market. Several cases of failed mergers or acquisitions dot the marketing communication industry in Nigeria.
Ego among agency owners is the major factor, according to former Association of Advertising Agencies of Nigeria (AAAN) President, now Agile Communications Chief Responsibility Officer (CRO), Rufai Ladipo.
Just as disagreement over CFO position threw a spanner in the works of the Omnicom/Publicis merger, Ladipo said, “Ego, to me, has been the mitigating factor against successful business partnerships in advertising.”
He recounted: “When I was about setting up Agile, I approached a few folks whose DNA (deoxyribonucleic acid) are likely going to match mine for possible partnership, but none was ready to come on board.
“In this part of the world, we are too emotional in business dealings and this will continue to set us back significantly. People would rather run a non-profitable business than agree to combine skill sets and conquer the world as a collective.”
Prima Garnet Africa Group Managing Director, Lolu Akinwunmi, said if agencies are not merging, perhaps they have not seen any strategic need.
He recalled that banks did not plan to merge, the Central Bank of Nigeria (CBN) “literally compelled” them to.
Telecommunications firms are not merging either, he noted. “Perhaps some have been bought over by others; that’s not merger; that’s acquisition.”
While banking, insurance, manufacturing and oil and gas sectors have grown through mergers and acquisitions, advertising has made affiliation its stronghold.
Affiliation has been described in several fora as an unequal yoke in which foreign partners usually have the upper hand.
It was believed that an Omnicom/Publicis merger would trigger off several other high profile mergers, both international and local, but its failure is also posited to having a major setback in the industry.
Ladipo said he could not see any immediate effect of the failed merger on local agencies, “but I could be wrong.”
He added: “The merger was so orchestrated that we all thought it was a done deal. In fact, Martin Sorrel was planning his own deal with another network, but now that the Publicis/Omnicom merger talks have fallen through, he can retrace his steps and embark on another strategy.
“WPP is still the largest and the best global marketing communications services network in terms of creative output, best practice and the cash register.
“In my opinion, not much had been committed in the 18 months that the two networks tried to couple the arrangement together.
“I don’t see any impact on the Nigerian market in terms of mergers. Perhaps the impact may come from those who had expected to benefit from the enlarged arrangement.”
Unlike affiliation, the toast of advertising agencies, merger offers bigger returns and a better balanced sheet, facilitated by shared resources and pruning excess fat from the merging entities.
However, the Nigerian advertising industry has witnessed a series of affiliations gone wrong in recent times.
Prima Garnet severed affiliation with Ogilvy, SO&U parted ways with Saatchi & Saatchi, Cosse has sent Bates packing, Insight kissed Grey goodbye and Centrespread did away with FCB.
But instead of sourcing foreign affiliation, why would local agencies not seek merger among themselves?
A senior advertising practitioner who pleaded anonymity said greed and ego are the cause.
His words: “We are in the industry where everybody wants to be an MD, no matter how weak the system of such organisation is. Every MD wants to leave the business for his son or daughter but they have forgotten that creative business is not hereditary.
“That is why our foundation is weak and foreign agencies would always see us as poor cousins despite our potential.”
Wren and Levy originally celebrated the announced deal with champagne toasts in Paris, saying it would enable them to better compete with the likes of Google and Facebook that dominate digital advertising, which accounts for nearly a quarter of global marketing spending.
Brian Wieser, a senior analyst at Pivotal Research, said consolidation in the industry is still on the table and other deals could happen with agencies such as Interpublic Group or Havas.
