PARIS (Reuters) - The advertising giant to be formed from the merger of Publicis (PUBP.PA) and Omnicom (OMC.N) may resolve any clash between its French and U.S. arms by taking on a more American identity, some industry observers said on Monday.
The two companies have portrayed the deal that will create a $35 billion industry leader as a “merger of equals”. They have similar market capitalizations and the new group’s board will be equally split between representatives of Publicis and Omnicom.
However, the merged company will be led by an American CEO after a 30 month transition and overseen from a headquarters on neutral ground in the Netherlands - far from the Paris home of Publicis near the Arc de Triomphe. Maurice Levy, the veteran CEO of Publicis whose French-accented English is a reminder of the agency’s roots, will take the less visible role of non-executive chairman.
“It’s a step the French company has taken because they’ve crossed the bridge of realizing they don’t need or want to be French anymore,” said one senior Paris-based banker. “From an organizational standpoint and a markets standpoint it’s going to be an American-based company.”
A second banker dismissed the notion of a merger of equals, saying the fact that Omnicom would end up in the driver’s seat could be positive.
“American companies tend to be pretty comfortable being in charge from the get-go - and that’s certainly the case here,” he said. “At the end of two years the sole CEO will be American. The main listing will be in New York. The holding company will be in the Netherlands. It’s not hard to figure out what’s going on,” said the banker.
Clarity on control could help the company avoid the fate of high profile mergers such as the Daimler-Chrysler deal of the late 1990s. This suffered from cultural clashes and a lack of overlap in the cars they sold until it was unraveled.
Similarly, the merged telecoms equipment group Alcatel-Lucent ALUA.PA bleeds cash while video games maker Activision Blizzard (ATVI.O) is buying itself out of its merger with the games arm of Vivendi (VIV.PA) in an $8 billion deal.
One former advertising executive said an occasional problem at Publicis was the pace of decision-making.
“Some of this is driven by the individual at the top, some of it is defined by geographic culture,” the executive said. “There is a lot of discussion at Publicis, whereas in an American culture, the issue is on the table, a decision gets made and everyone leaves the room.”
Levy has dismissed the possibility of tensions in the Omnicom deal case. “It’s in everyone’s interest for this to be one unified group, with a single management and culture,” he said on Sunday. “We need to create a harmonious team and not play silly games with people trying to impose being American or more French.”
Omnicom’s CEO John Wren sounded a similar note, insisting that the merged group would keep the Publicis building on the Champs Elysees and portraying the plans for a Dutch headquarters as a sign that Omnicom is shedding some of its U.S. identity.
Such arguments fell on deaf ears at France’s CGT trade union. It said the merger went against the French government’s effort to preserve French brands, adding that the new group would be dominated by the U.S. side in many areas.
The union called on the government and competition authorities to avoid a monopoly situation being created, adding that it would mobilize to protect jobs.
While a transition to a more U.S.-centric culture could eliminate one source of long-term bickering, the new entity may also be helped by the fact that both holding companies already grouped a diverse stable of agencies with different characters and styles, one analyst said.
“Within the advertising agency arena, M&A is embedded as a corporate strategy, so many of these companies have been part of deals consistently over the last 30 years and maintained profound brand independence, so they avoid conflicting companies where they can,” said Jefferies analyst David Reynolds.
Respect for differing cultures under one roof has been particularly strong at the pre-merger Omnicom, which managed to keep the differences between such agencies as BBDO and TBWQ, said David Kershaw CEO of M&C Saatchi.
However, he added: “The bigger it gets, the more homogenous it becomes, the more those cultures get homogenized.”
Additional reporting by Jennifer Saba and Paul Sandle; editing by David Stamp