BARCELONA (Reuters) - Three major rivals to advertising groups Omnicom (OMC.N) and Publicis (PUBP.PA), which are merging, say they are poaching work from the pair by luring clients who are unsettled by the $35.1 billion deal.
Market leader WPP (WPP.L), fourth-placed Interpublic Group (IPG.N) (IPG) and Japan’s fifth-placed Dentsu (4324.T) said they had either begun to win work or believed they could do so as major brands bristle at the coming together of the industry’s second and third largest players.
Also up for grabs, the three groups said, were the more than 130,000 Omnicom and Publicis staff across five continents who could defect as the two holding companies focus on stitching their agencies into a new group.
“It certainly has disturbed the client base and it certainly has disturbed the staff,” WPP Chief Executive Martin Sorrell told the Morgan Stanley investor conference in Barcelona.
“Clients are not going to come out and say ‘I‘m firing an agency’ because they merged. But if you watch the rooms carefully, there are changing patterns of distribution in the business which will benefit us.”
Omnicom and Publicis revealed plans to merge in July this year, sparking a scramble for their blue-chip clients who are worried the new firm might face conflicts of interest.
Without any defections, the Franco-U.S. giant would bring the accounts of major competitors in a number of industries such as Apple (AAPL.O) and Samsung (005930.KS), or Coca-Cola (KO.N) and PepsiCo PEP.N, under one roof.
It will also bring together Publicis agencies such as Saatchi & Saatchi and Leo Burnett with Omnicom’s BBDO Worldwide and DDB Worldwide.
”When you have two companies of that size coming together, with different cultures, there’s going to be disruption,“ IPG Chairman and Chief Executive Michael Roth said. ”And from disruption comes talent opportunity.
“There are still some conflicts out there that are unacceptable and we are a very viable candidate if that is an issue. We are ready, willing and able to step in.”
Roth told the conference one of his agencies had recently hired “a number of very talented people” from the two merging groups.
Omnicom Chief Executive John Wren and Publicis boss Maurice Levy told a room full of investors and competitors, including Sorrell and Dentsu’s Tim Andree, that they had always expected their rivals to step up the pressure.
The two men, relaxed and finishing each other’s sentences, repeated their belief that the combined group would be able to better compete in a changing media landscape and said they had received only support from their biggest clients.
The deal is due to complete in the first half of next year.
“I don’t see any great threats coming from client conflicts,” Wren said, before asking Sorrell if he would like to join them on stage. “People have tried to promote that as an issue but that’s not real in my opinion.”
In the latest set of trading updates, WPP emerged as the victor, reporting third-quarter organic growth of 5 percent, accelerating from the first half and outperforming Omnicom and Publicis who reported 4.1 percent and 3.5 percent respectively.
IPG reported like-for-like growth of 2.8 percent.
Also competing for work in this new climate is Dentsu, the Japanese advertising group that completed its acquisition of British media buyer and planner Aegis earlier this year, to enable it to compete for global media accounts for the first time.
Andree said the group was growing rapidly, as its Japanese clients now use Dentsu for international media work and as Aegis brands move into Japan. It has also won clients that were new to both groups.
“We’ve had some success when you look at our new business record in the past quarter, we’ve had a high percentage of that business coming from Publicis Omnicom,” he said.
“Anecdotally, clients are not really understanding the benefits for them (of the merger). And that’s always a dangerous position to be in. (When we bought Aegis) we went out of our way to communicate with the talent and leadership in the agencies that it was business as usual.”
Reporting by Kate Holton; Editing by Anthony Barker