From Layoffs to AI: 5 Things To Know About Omnicom's IPG Takeover

Though initially described as a mega-merger, the deal between Omnicom and Interpublic Group is structured as an acquisition by Omnicom, and the new entity will continue to be called Omnicom and trade on the New York Stock Exchange under the OMC ticker. A new leadership structure was announced Monday (Dec. 9) morning. The combination brings together some of the world’s most iconic ad agencies, from BBDO to McCann, as well as two media buying powerhouses, and experiential, PR and other marketing services firms across the globe. And it helps protect the holdcos from major tech-driven changes in the industry. “This move allows us to take control of our own future, rather than wait for technology to impact it in ways that you can't anticipate today,” said Omnicom CEO John Wren during an investors call with IPG CEO Philippe Krakowsky on Monday. Terms of the deal were not disclosed during that call, but the Wall Street Journal reported the transaction values IPG at between $13 billion and $14 billion. Here’s what we learned during the call. Lay-offs are likely, but Wren said employees who generate revenue are safe Omnicom and IPG expect $750 million in cost savings, most coming within the first 24 months of closing. No major cost-savings actions can be taken until the deal is approved, Wren said. But when it does happen, those cost-savings, which will have a one-time charge of $450 million initially, will happen from streamlining the two organizations, sharing office space, combining offshoring and automation capabilities, and cutting out third-party vendors. Neither Wren nor Krakowsky directly used the word “layoffs,” but Wren said both companies have “made a great deal of progress” already in streamlining their respective back-office functions and “taking action on our overheads.” As with other major cost saving initiatives, layoffs can’t begin until the deal clears regulatory approval. He added that employees tied to revenue-generating activity will be safe. “You’re gold,” Wren said. “Don't worry about it.” The big growth areas: Healthcare, audience data, retail media, and AI investments Thanks to the merger, Omnicom will grab more revenue from fast-growing disciplines like media and precision marketing, according to CFO Phil Angelastro. And IPG will be able to access Omnicom’s sizable business in principal media buying, Krakowsky said. The combined holdcos also expect to grow their healthcare footprint. “If I was a pharmaceutical company, I'd pause and look at what the combined portfolio of this company will have in six or nine months,” Wren said. Omnicom also gains a huge ability to activate on first-party audience data through Acxiom, which IPG acquired for $2.3 billion in 2018. It hopes to mimic the great success Publicis has had with its similar audience solution Epsilon. “We certainly will be able to do that and more by the combination of IPG’s assets with our assets,” Wren said. Omnicom hopes to combine Acxiom’s first-party data with commerce media capabilities from Flywheel, which Omnicom bought last year for $800 million. Cross-selling Flywheel with Acxiom will help boost the combined holdcos’ media and precision marketing, Krakowsky said. The biggest opportunity, Wren said, is in pooling investments around industry-transforming tech, like generative AI. With more money comes more ability to test new tech, Wren said: “It should make me take greater investment risks in testing new technologies and platforms as they come up.” The Trump administration might make for a more favorable merger environment Wren said he is “pretty confident” the merger won’t face too many regulatory issues, as marketing services firms are now just “a component in the marketing mix.” He said the incoming Trump administration in the U.S. might be more favorable to the transaction. Wren also said he isn’t really concerned about client conflict, as clients are not as touchy about this as they used to be. And both Wren and Krakowsky didn’t seem too worried about either clients or top talent jumping ship. “I think both cultures, both leaders here, are sensitive to making certain that we provide career opportunities for the best and the brightest,” Wren said. “I think it'd be short sighted for a big client to go through changing to a different vendor and discarding either of us.” Less presence in Europe and APAC, more in LATAM Wren said he hasn’t made decisions about the combined company’s new structure as it awaits regulatory approval. But Wren said: “We certainly will know day one what we want the structure of the organization to be.” The new company will be weighted towards a presence in the U.S., at 57% of revenue, compared to 51% previously. It will have less exposure to Europe and Asia-Pacific than before, and a larger presence in Latin America. Omnicom and IPG makes more sense than Omnicom and Publicis Groupe Investors were quick to point out that Omnicom attempted to merge with a different competitor a decade ago and failed. What will make this time different? Cultural alignment is one aspect. “We actually share core values, and we have since the creation of both groups,” Wren said, adding that many staffers of both companies have worked at the other at some point in their careers. “A lot of the cultural, unspoken things that get in the way of doing these things successfully…it was a decade ago, but they got in the way,” he said of the failed Publicis merger. Plus, Omnicom and IPG are both U.S. based and listed, whereas Publicis is not. “Going back in history, China was holding up the Publicis-Omnicom merger,” Wren shared. “We have prepared for those contingencies, and we're prepared to do whatever we have to do to get regulatory approval.”

Omnicom-IPG

From Layoffs to AI: 5 Things To Know About Omnicom's IPG Takeover

John Wren and Philippe Krakowsky addressed analyst questions about the bombshell deal

Alison Weissbrot

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