Big Advertising just got bigger with Omnicom’s Interpublic merger

Omnicom Group has agreed to acquire Interpublic Group, effectively merging the world’s third- and fourth-largest advertising holding companies to become the largest ad company in the world if successful.

Omnicom chairman and CEO John Wren said in a statement, “Through this combination, we are poised to accelerate innovation and harness the significant opportunities created by new technologies in this era of exponential change. Now is the perfect time to bring together our technologies, capabilities, talent and geographic footprints to bring clients superior, data-driven outcomes.”

The company said that the transaction is expected to generate $750 million in annual cost synergies and increase adjusted earnings per share for both Omnicom and Interpublic shareholders. The combined 2023 revenue of the two companies was $25.6 billion, adjusted EBITA of $3.9 billion, and free cash flow of $3.3 billion.

To put it in brand terms, it would bring together the agencies for Geico (The Martin Agency), Taco Bell (Deutsch), and Microsoft Xbox (McCann) with the agencies for Apple, McDonald’s (TBWA), P&G, Pepsi, and Pedigree (BBDO).

It’s a massive move to help the holding company model keep pace with technology and the demands of major brand marketers.

More of the same

On the surface, the proposed merger appears to be a natural extension of what ad holding companies have been doing for decades. As the industry has ebbed and flowed, holding companies have used a combination of M&A and internal consolidation to deliver on their original promise of gathering the entire marketing and advertising ecosystem under one roof—creative, research, PR, media buying and planning, digital production, and social media. The goal is to be a one-stop shop for the world’s largest marketers.

However, it was never a perfect strategy. The model has created bloat, turf wars, an emphasis on media buying over creative, while also putting the needs of Wall Street investors over great work. As a result, every few years there is a wave of new, smaller independent shops that pop up to challenge the giants, and push the creative envelope for brands.

To keep pace, holding companies have done their own internal shifting over the years. Back in 2018, for example, WPP—currently the world’s biggest ad company—merged J. Walter Thompson and Wunderman to create Wunderman Thompson, and VML and Young & Rubicam to form VMLY&R. Then in 2023, it went a step further and merged Wunderman Thompson with VMLY&R to become VML.

Omnicom has taken a different tack. The company has held its commitment to its agency brands by not consolidating them. Now adding Interpublic’s 83 different company brands will certainly bring new challenges to that approach.

Innovation, not consolidation

Over the past few years, Omnicom has reorganized its portfolio of businesses into marketing disciplines leading to Omnicom Media Group (OMG), Omnicom Health Group (OHG), Omnicom Precision Marketing Group (OPMG), and Omnicom Public Relations Group (OPRG). In August, it announced its own internal reorganization of its ad agencies to create Omnicom Advertising Group (OAG). But it had less to do with sunsetting agency brands and more with rearranging how they could and would work together.

Starting in January, OAG will be led by TBWA Worldwide CEO Troy Ruhanen. Back in August, Ruhanen told me that this wasn’t about consolidation in the name of cost efficiency. “The story is about really making sure that we can help these agencies, these brands, thrive. And how we’re going to do that is by obviously using scale to our advantage,” he said. “We are always about the agency brands. What I like about this model, is that we give clients choice, we give them flexibility, and we just don’t have one way of doing things.”

I’ll be interested to see how the company works to scale out its AI efforts even more broadly than originally planned with OAG. In June, TBWA launched its own AI platform call CollectiveAI, built on the back of Omnicom’s existing generative AI suite of services. Utilizing the holding company’s AI partnership agreements with Adobe, Microsoft, Google, and DALL-E, the agency created tools tailored to TBWA’s own creative and strategic philosophies. Ruhanen said he sees that as an example of how OAG will work.

“We build these platforms, then we personalize it with our methodologies and our ways of working as an agency,” he said. “When you identify an innovation that you think is really amazing and unique, how do you share that? How do you scale that so you’re not doing 55 different versions of it? It’s about identifying innovation, being able to scale it, doing it once brilliantly, and then personalizing into the agency cultures. That’s where the efficiency really is.”