Publicis-Omnicom Deal Sees Levy Oust Sorrell as Adland King
Comment of the Day

July 29 2013

Commentary by Eoin Treacy

Publicis-Omnicom Deal Sees Levy Oust Sorrell as Adland King

This article by Kristen Schweizer and Marie Mawad for Bloomberg may be of interest to subscribers. Here is a section
The transatlantic tie-up of Publicis Groupe SA and Omnicom Group Inc. pushes the reigning king of adland, WPP Plc's Martin Sorrell, into a spot he hasn't been in in more than four years: runner up.

Publicis Chief Executive Officer Maurice Levy and Omnicom CEO John Wren toasted the unveiling of Publicis Omnicom Group with Ruinart champagne atop Publicis's Paris headquarters yesterday, celebrating a merger due to unseat London-based WPP and its 68-year-old founder Sorrell, widely seen as the face and mouth of the industry.

“What will WPP say in a world where they're not the biggest? A version of Omnicom agency DDB's line: When you're only No. 2, you try harder?” said Nick Jefferson, managing director at marketing and advertising company Gyro in London. Sorrell “has worked hard to become the ‘go-to-guy' for advertisers, and for anyone who wants to know how advertisers are thinking and -- crucially -- spending.”

WPP has been the biggest ad company since its 2008 acquisition of Taylor Nelson Sofres Plc. Yesterday's announcement by third-ranked Publicis and New York-based Omnicom, the current No. 2, ushered in a behemoth with a market value of $35 billion and left competitors and analysts alike questioning both its logic and what the future will look like with Sorrell's long-time nemesis Levy atop the heap.

Eoin Treacy's view Google and Facebook represent some of the greatest beneficiaries of the innovation in how advertising is delivered and Google in particular is a powerful advertiser in its own right. The more traditional ad agencies which provide additional services such as conventional marketing, production, lobbying and publicity have carved out truly global businesses and represent something of an oligarchy.

The market initially responded positively to the news that Publicis and Omnicom will merge with both extending their respective uptrends. However, they are both overextended relative to their 200-day MAs and susceptible to mean reversion. WPP has a similar pattern but without the bullish catalyst of a merger has paused in the region of its peak and is also susceptible to some consolidation of recent gains. We consider all three of these companies Autonomies because of their global reach and dominance of their niche. (Also see Comment of the Day on July 11th).

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