LONDON (Reuters) - Martin Sorrell, head of world No. 1 ad group WPP, congratulated long-time rival Maurice Levy on persuading Omnicom to merge, adding that further consolidation was inevitable in the industry.
Sorrell was reacting to news that France’s Publicis and U.S. group Omnicom had agreed to combine in a deal that would catapult the world’s third- and second-largest advertising companies above UK-based WPP.
“It’s an extremely bold, brave and surprising move,” Sorrell told Reuters in an interview on Sunday. “You have to give every credit to Maurice, he managed to persuade him.
“It’s a great deal for Publicis, being a nil-premium merger,” he added, though he said the logic of the deal did not appear to fit with the French group’s long-held strategy.
Under the planned merger, the new company would have a combined market valuation of $35.1 billion, with Omnicom providing the majority of revenue, having posted $14.2 billion in sales last year against $8.8 billion for Publicis.
Sorrell said the deal appeared to be “off-strategy” for Levy in that he had built his group up during his 26 year tenure largely through deals with a focus on digital marketing and faster growth markets such as India and China, much like WPP.
“Time will tell if the cultures will click and whether clients will benefit,” he said of the deal, which will give Publicis a far greater U.S. presence.
“But further consolidation of our industry is inevitable. An equilibrium may be starting to be established which will generate further significant opportunities for WPP organically.”
The deal is not without risks, with regulators in the United States and possibly some European markets likely to look closely into what the merger will mean for the wider industry.
Some clients could also object to the agencies having conflicts if they also now work for competing firms, and large media owners may question what this could mean for the price of buying media space.
The move is also likely to take staff focus away from clients and onto “internal politics and gossip” as employees wonder what the deal means for them, the head of smaller French rival Havas, David Jones, said on Sunday.
Publicis Chief Executive Levy said the two sides started to consider a merger after he casually mentioned the idea to Omnicom boss John Wren at a social event about six months ago.
In the new group, the two men will act as co-CEOs - a formula that rarely works well, according to Sorrell - before Levy moves on to become non-executive chairman.
Editing by James Regan