The $31 billion Omnicom-IPG deal has industrial logic but also many caveats

Omnicom’s decision to buy Interpublic and create the world’s biggest agency group was not a complete surprise. Campaign has been reporting for the past 18 months about the likelihood of consolidation among the “big six” agency groups.

In July 2023, on the tenth anniversary of Omnicom’s abortive $35 billion “merger of equals” with Publicis Groupe, I asked whether the stars would align for another agency mega-merger and suggested John Wren, the long-serving CEO of Omnicom, still liked the idea.

The industrial logic for a merger between two of the “big six” holding companies was “arguably stronger than ever”, I wrote, because the global agency sector had grown relatively modestly in revenue terms in the last decade whereas the biggest advertising platforms—the tech giants—had grown hugely, and artificial intelligence threatened fresh disruption.

I first heard unsubstantiated chatter that IPG had reached out to Omnicom about a deal at the end of 2023 but the two US companies insisted to Campaign it was not true. Omnicom was in the final stages of completing what was the biggest acquisition in its history, Flywheel, at the time.

But as we moved into 2024, everyone could see a valuation gap was emerging between France’s Publicis, which was outperforming its peers, and the rest of the “agency pack”. Practically all of the main agency groups were starting to talk to each other and private equity investors were sniffing around, too.

I wrote in April that the M&A rumour mill was “buzzing” and the Omnicom-IPG tie-up was number one on the list of potential combinations. And so it has turned out, as Wren and Philippe Krakowsky, the chief executive of IPG, announced their all-stock deal last Monday (9 December).

Industrial logic makes sense

So will the deal work? That’s the $31 billion question, given that was the combined stock market capitalisation of Omnicom (about $20 billion) and IPG ($11 billion) prior to the news.

Acquiring IPG means Omnicom gains scale in media, data and technology—areas in which Publicis has been leading. It adds almost $11 billion in revenues to create a $26 billion-a-year turnover business, well ahead of Publicis and Britain’s WPP on about $16 billion and $19 billion each, based on 2023 revenues. 

(Most investors prefer to look at revenues after pass-through and other third-party costs are deducted, which Omnicom does not disclose. On that basis, estimated revenues at Omnicom-IPG would be nearer to $22 billion and Publicis and WPP closer to $15 billion each in 2024.)

Margins should improve by driving $750 million in annual synergies and the combined group will have greater resources to invest in tech and AI.

Importantly, Omnicom takes out a competitor and reduces the global agency marketplace at the highest level from four to three—in theory, without stifling overall competition because there are other players. There would still be a “big five” when Dentsu and Havas are included, plus there has been the entry of consulting giants such as Accenture, Deloitte and CapGemini, and there are many independents of various sizes.

Still, the Omnicom-IPG deal is a bet that scale and market share matter when dealing with large clients and giant tech platforms. The biggest clients, in particular, need agency partners who can help them to navigate a highly complex digital ecosystem and offer a huge range of integrated capabilities.

“You can’t look at the industry any more, really, from a serious player point of view – maybe you can from a boutique point of view—without understanding that cost of entry has risen quite a bit,” Wren told Campaign in a joint interview with Krakowsky on the day of the deal.

The pair talked a lot about the importance of data and technology and the potential of combining IPG’s Acxiom with Omnicom’s Omni and Flywheel.

However, media-buying is a major, if not the biggest, driver, according to people involved on both sides of the deal. Globally, the Omnicom-IPG combination would become the largest in media with $71 billion in billings and a 32% share among the new “big five”, versus WPP on 28%, Publicis 24%, Dentsu 12% and Havas 5%, according to Comvergence. 

“Scale is back with a vengeance,” one media person says, particularly in the US, where IPG has been losing big accounts such as Amazon and Johnson & Johnson and lagging on principal-based media-buying—a big growth area.

Arguably, this tie-up is a defensive move for Omnicom as well as IPG. Both companies can see how Publicis has pulled ahead and are facing a general squeeze on agency services, even before the full impact of the AI revolution hits.

Can Omnicom successfully integrate IPG?

Wren knows he must avoid the mistakes of the failed Publicis deal, which is why Omnicom is acquiring IPG, not merging with it.

The fact these are two US companies, which have broadly similar cultures and a history of respecting agency brands, should help with the integration, insiders on both sides said. However, there are many executional risks—for example, connecting together Acxiom, Omni and Flywheel is not guaranteed to pay off.

The fear is that $750 million of annual synergies will mean thousands of job cuts across the two groups, which jointly employ more than 130,000 people. Wren and Krakowksy have set aside $450 million in restructuring costs to achieve the synergies and say they will focus on back-office “overhead”, rather than “client-servicing” roles. 

Even without this deal, some rationalisation of agency brands and offshoring of roles to cheaper locations were always going to be necessary for each company, particularly given the slow growth seen at creative agency networks across most holding companies. Wren made a revealing comment to Campaign that may have betrayed a degree of wishful thinking when he said of the merger: “It takes us out of all the baggage that you might find in a legacy advertising group.”

Some disruption is certain and the upheaval is likely to unsettle some clients, especially as rival agency groups and nimbler independents will look to exploit the situation and poach talent during the limbo period. 

Caveats

Omnicom and IPG expect the deal to take until the second half of 2025 to close and it would be rash to predict that the regulatory process will pass without incident or that investors will give it their unquestioned support.

IPG shareholders are receiving Omnicom stock in exchange for their existing shares and Omnicom’s share price fell 10% after the acquisition was announced. IPG’s organic revenue performance during the early quarters of 2025 could also matter if account losses seen during 2024 have an impact.

Overall, it is hard to get excited about this deal. There is a hint of déjà vu after the failure of Publicis Omnicom and internal restructurings at WPP and Dentsu have also been bruising, although one Omnicom creative leader says its recent move to bring its creative agencies under the Omnicom Advertising Group umbrella has been handled respectfully and augurs well.

Wren and Krakowsky themselves did look rather sombre in publicity photographs that were taken at a law firm where the deal was signed in New York—in contrast to the pictures of Wren and Maurice Lévy of Publicis posing cheerily in front of the Arc de Triomphe in 2013.

Despite these caveats, the industrial logic of reducing the number of the largest agency players in the market remains compelling.

This is a sector that looks overserved and is overdue consolidation and it is possible that this deal will trigger further large-scale M&A. 

Agency life has got tougher inside holding companies as clients take some services in-house and buy direct from tech platforms, yet the digital advertising and marketing world is growing, not shrinking, and continues to attract creative, inventive and entrepreneurial talent.

If the planned Omnicom-IPG tie-up happens, the biggest beneficiary might turn out to be not the two companies involved but the wider agency sector.

Gideon Spanier is UK editor-in-chief of Campaign