The past weekend brought us M&A fireworks as Publicis and Omnicom tied the knot creating the largest marketing services company known to mankind.
First, the clever part –
In what might be an industry first, a Vine video showed the respective chiefs signing on the dotted line. I guess two tokes on a peace pipe wouldn’t fit in six seconds.
But is the deal actually clever?
It depends on your perch.
The boys that shape a company’s stock price certainly like growth. They don’t really care if the growth comes from organic means or acquisition. “Growth is good,” to bastardize the Gordon Gekko line.
There’s only one thing that Wall Street likes more than growth. That’s bigness. The bigger the better. I used to think this was an American thing symbolized by the Big Gulp from 7-Eleven. Apparently the French like big too.
For financial analysts, this is a deal consummated in P/E ratio heaven.
Which is exactly the master plan from Omnicom and Publicis:
“The transaction is expected to create significant value for shareholders. The new company’s broader portfolio of agencies and services and deeper geographic footprint will allow the combined company to accelerate revenue growth and create operating synergies. The future scalability and internal synergies of the combined company are expected to generate efficiencies of $500 million.”
Switching vantage points, does the deal help current and prospective clients of the two companies?
After raking through the news release and numerous articles, I don’t see even a breadcrumb that would lead to a “yes.”
Before going further, I appreciate that there are some advantages to scale.
As an independent communications consultancy with more than 100 staff members, we simply don’t have the resources to address a massive multi-million dollar assignment.
But when does scale become corporate bloat?
When does getting bigger offer goodness to Wall Street and nada on the client service front?
I can’t provide a precise answer to those questions. Throwing a dart against the board, 50,000 or even 10,000 employees strikes me as a sizable talent tool. The combined entity of Publicis and Omnicom will employ 130,000 people. How is this a good thing for clients?
Which makes it a good thing for us.
There’s a pragmatic component that plays in our favor.
Putting the few mega accounts to the side, the typical client campaign in the communications world calls for account teams ranging from four to 20 account professionals. I’d match our account team members with any of the huge PR agencies around the world. We just need to avoid activities where heft makes a difference, like a tug-of-war-contest at those awkward industry picnics.
It’s also worth noting in the large agency structure, you simply don’t get senior talent contributing to the service delivery until you reach the magical $1,000,000 annual number or roughly $80K per month, and even then it tends to be parachute counsel.
I’m convinced that there’s not only a place for independent agencies like ours, but increasing opportunity as clients prefer to see their dollars spent on the actual work as opposed to overhead.
True, we’re not going to be a fit for assignments calling for a large purchase of media in which heft – there’s that “H” word again – from the collective leverage of Publicis/Omnicom’s $3.34 billion in media placements comes to the fore.
On the other hand, if the assignment emphasizes creativity and the narrative, our high-touch approach stands in stark contrast to the product cranked out by a 130,000-person organization.
BTW, I do believe we need more size to tap our full potential.
Just not 129,880 more employees.