The most unexpected twist in Omnicom Group’s landmark merger with Interpublic Group is how many agency brands the combined company chose to keep intact, said Brian Wieser, chief executive of consulting firm Madison and Wall.
Speaking with Beet.TV editorial director Lisa Granatstein, Wieser said he had anticipated deeper consolidation, especially across media agencies, than what Omnicom has announced so far.
Wieser said he “would have expected” the merged company to streamline more aggressively given the scale of the deal and the cost of maintaining so many distinct brands.
“If there is any surprise right now, it’s that they’ve kept as many brands as they have,” he said.
Media networks like UM, Initiative and Mediahub all remain, leaving Omnicom with six major media shops. That’s “arguably five too many,” in his view. While creative networks are being collapsed into three global platforms, the media landscape remains far more fragmented than industry logic would suggest, he said.
Brand pruning and job cuts
Omnicom this week outlined its initial restructuring plans following the closing of its $13 billion acquisition of Interpublic, a combination that vaults the company to the top of the global agency rankings by revenue.
The company is eliminating a slate of long-established names, including IPG’s FCB and MullenLowe, which will be absorbed into BBDO and TBWA, respectively. DDB, founded in 1949, is also being retired as a standalone brand and folded into TBWA.
The move is part of a broader integration that will cut more than 4,000 jobs and consolidate smaller regional networks. Those cuts come atop thousands of layoffs both companies initiated while preparing for the merger.
Omnicom CEO John Wren has said the integration will generate cost savings above the $750 million annually previously projected, with details expected early next year.
Wieser said that while these steps indicate movement, Omnicom appears to be keeping many units potentially destined for sale.
“It sounds like maybe a tenth of the company will be disposed of, which actually maybe is not enough,” he said. He also expected some asset sales to be announced before closing. “It would have been a cleaner slate to have a lot of those transactions occurring already.”
Most of the top jobs in the newly combined organization are going to Omnicom leaders, with former IPG executives receiving limited representation at the highest levels. Wieser said the resulting uncertainty inside the company is predictable, and could create short-term openings for rivals.
“It would be shocking if there wasn’t a little bit of chaos,” he said, adding that some employees are likely to look around for other opportunities. “It’s safe to say that clients will follow the talent that they want to work with.”
Why keep so many media agencies?
On the decision to maintain six sizeable media agencies, Wieser argued that while Omnicom and IPG have historically believed in the value of differentiated agency brands with distinct cultures, talent pools and client rosters, the cost of supporting them is substantial.
“The investment required to keep and support the separate brands and the extra layers of management that follow from having separate brands are way more costly than any benefits you get from culture that might be unique to an agency brand,” he said.
Creative agencies, by contrast, are being streamlined more aggressively. But several independent-minded creative shops like Goodby Silverstein, The Martin Agency and Zimmerman remain unaddressed.
“We don’t know what happens to … the ‘cats and dogs’ of the business. They might be doing fine, but probably are not synergistic with the rest of the group,” he said.
OmniPlus, push toward AI-driven operations
Omnicom will showcase a new offering, OmniPlus, at CES in January, part of what the company describes as a larger effort to unify data, identity, commerce and AI capabilities through its Omni platform.
Wieser said the details remain unclear. While data and AI are now baseline features for all leading agencies, he said it is too early to know what the “plus” in OmniPlus represents.
In its formal strategy update, Omnicom said the combined company will operate with five “strategic advantages”: the world’s largest media network, a deep bench of creative talent, scaled commerce services, enterprise-level AI capabilities and a global identity spine powered by Acxiom RealID.
Leadership of these capabilities spans media chief Florian Adamski, public relations chief Chris Foster, production head Sergio Lopez, Omni platform leader Duncan Painter and advertising chief Troy Ruhanen, among others. John Wren remains chairman and chief executive officer.
Impact on rivals WPP and Publicis?
Despite the size of the deal, Wieser said he doubts it will compel Publicis or WPP to pursue mergers of their own.
“I don’t think that this transaction necessarily means anything for WPP and Publicis outside of a short-term opportunity to attract new people and clients,” he said.
He expects rivals to take advantage of the inevitable disruption inside Omnicom.
“It would be shocking if there wasn’t a little bit of chaos inside of Omnicom with all of these changes,” he said, adding that “where Publicis and WPP think they can make an opportunity happen for individuals who can bring business with them, that will probably happen in some cases.”
The merger, he said, is unprecedented in the agency world: two companies of comparable size combining, with leadership effectively dominated by one side. As he put it, “frankly, we’ve never seen a merger of this kind inside the agency industry, at least where you have two similarly sized entities where one entity’s management is basically taking over almost entirely everything.”
That dynamic, he added, will inevitably spur career reconsiderations.
“If you’re a former Interpublic employee, and frankly in some cases an Omnicom employee, and you don’t know what the political landscape is for you inside the entity, your eyes are going to be open for opportunities,” Wieser said.
Will the merger succeed? That depends.
Omnicom has asked investors to judge success largely by improvements in return on invested capital, a backward-looking measure Wieser said is hard to forecast without visibility into the company’s future plans.
“If they can improve return on invested capital and there’s a number of levers that they can use to do that, then it’s a success,” he said, before cautioning that ROIC “is very backward looking, it’s not forward looking.”
Organic growth and margin expansion are typically key indicators in the sector, but Wieser warned that Omnicom’s reporting practices make comparisons difficult.
“We don’t really know and probably will never know what their real organic growth or margins are, at least on a comparable basis, because they do not disclose comparable revenue numbers to any other agency group,” he said.
Reporters must account for that, he added: “Anyone who’s reporting or covering what their organic growth numbers are without also noting that their numbers do not match the way the industry defines growth is kind of doing a disservice to anyone who’s consuming that information.”
Still, Omnicom has signaled confidence. The company recently raised its dividend and plans to outline further capital-allocation decisions at an investor day early next year. It will also debut an updated version of its Omni platform at CES in January, promising broader AI integration across its global network.
