The planned merger of major, global advertising holding firms Publicis and the Omnicom Group has hit a few major hurdles of late, which will need to be resolved before the $35 billion merger can take place. The first major hurdle to overcome will be the disagreement over who will serve as the freshly merged group's chief financial officer. Publicis has its own CFO, Jean-Michel Etienne in their sights, whereas Omnicom fancy their own CFO, Randall Weisenburger. Maurice Levy from Publicis and John Wren from Omnicom are currently working together to settle the issue.
The first major hurdle to overcome will be the disagreement over who will serve as the freshly merged group's chief financial officer
There are also serious arguments over which of the firms will be listed as the buyer (or “Accounting acquirer”), and questions regarding the tax residency of the merged company (considering Publicis is based in France and Omnicom is based in the US). The agreement was made last July, when the firms agreed to merge in an all-stock transaction. At the time it was assumed that the merger would go through without a hitch, but these recent rows have raised some real doubts as to how the staff and executives of each company will be able to work with one another, if and when the merger goes through.
The tax residency issue, meanwhile is another serious hurdle the companies will need to overcome if the merger is to go ahead. According to official statements released by both firms, they have been attempting to secure residency in Britain, even though the company will be legally based in the Netherlands and with operating offices in Paris and New York. The Dutch have thus far rejected the idea of the merged company being based in their country, but immune to local tax laws.
The row could be symptomatic of other, more deep-seated conflicts between the companies
As far as who will be listed as the accounting acquirer, a decision has yet to be reached. The acquirer refers to who is the official buyer from an accounting standpoint and in the case of a merger the title is generally given to the party that has claimed the largest share of voting rights and equity. In this case, however, both sides are claiming equal equity and voting rights, which means other criteria must be taken into account. New York-based corporate analyst Robert Willens has said that the row could be “Symptomatic of other, more deep-seated conflicts between the companies,” conflicts which deserve to be taken seriously if Martin Sorrell, CEO of rival firm WPP is to be believed. Sorrell estimates that there is now “A third to a half chance” that the merger won't be completed.
Omnicom CEO John Wren (left) and Publicis Group CEO Maurice Levy (right)
Omnicom and Publicis ranked as the 2nd and 3rd largest advertising groups in the world respectively, with WPP claiming the top spot. The merger should see them pip their shared rival to the post. Publicis brings to the table a sizeable portfolio of assets, including LBi, Digitas and Razorfish, clients such as Coca-Cola and BMW, and a number of agencies in emerging markets. Omnicom meanwhile, has clients such as PepsiCo and Nissan under its belt, as well as some accounts (such as McDonald's) which already overlap with Publicis. The deal was expected to close by the first quarter of 2014, but now it would appear the merger is very much up in the air.
Benjamin Hiorns is a freelance writer and musician from the UK. The closest he's ever come to a major merger was when he knocked through his kitchen wall to make a kitchen/diner.
