Advertising Firms Omnicom and Interpublic Nearing Merger That Would Reshape Industry
Tie-up would create world’s largest ad conglomerate in sector being upended by technology
Omnicom Group OMC 0.27%increase; green up pointing triangle is in advanced talks to acquire Interpublic Group IPG -0.75%decrease; red down pointing triangle, a deal that would create the world’s largest advertising company, according to people familiar with the matter.
A transaction could be announced as early as this week, some of the people said.
The exact terms of the deal being discussed couldn’t be learned. The all-stock deal is likely to value Interpublic at between $13 billion and $14 billion, excluding debt, some of the people said. Interpublic had a market value of nearly $11 billion as of Friday.
A combined entity would have net revenue of more than $20 billion, based on 2023 figures for each company.
Combining Omnicom, the world’s third-largest ad company, and Interpublic Group, the fourth-biggest ad company, would topple WPP as the industry’s biggest player. WPP’s net revenue last year was about $15.1 billion.
A deal would bring together some of the world’s best-known ad brands under one roof, following decades of consolidation on Madison Avenue. A handful of conglomerates are the power players behind the majority of ads people come across on TV sets, before they can play YouTube clips and on roadside billboards. In addition to producing advertisements, the companies own firms that buy ad space, develop loyalty programs, analyze shopper data, handle crisis communications and tap influencers for marketing campaigns.
Omnicom and Interpublic have helped create some of history’s most iconic ads, including “Think Different” for Apple, “Priceless” for Mastercard, “Because I’m Worth It” for L’Oreal and “Got Milk” for the California Milk Processor Board.
Omnicom, led by Chief Executive John Wren, includes agencies BBDO, TBWA, FleishmanHillard, and ad buyer Omnicom Media Group and works for companies including Disney, AT&T and PepsiCo.
Interpublic, which CEO Philippe Krakowsky leads, owns agencies such as McCann Worldgroup, Weber Shandwick, FCB and ad-buying firm Mediabrands, and has a client roster including L’Oréal, Johnson & Johnson and Geico.
A combination of Omnicom and Interpublic would mark the biggest deal to date on Madison Avenue. Omnicom pursued a $35 billion deal in 2014 with ad company Publicis Groupe, but it collapsed, partly because of battles over which company would control certain positions in the combined company. Omnicom and Publicis couldn’t even agree on which company would be the acquirer, The Wall Street Journal reported.
A merger could help Omnicom and Interpublic become better equipped to deal with an industry increasingly driven by technology, data and artificial intelligence. Ad companies are working to stave off competition from tech companies such as Alphabet’s Google and Meta Platforms that are using AI to drive deeper into the business.
Generative AI threatens to disrupt how agencies get paid and could potentially diminish demand for copywriters, graphic designers and the ad buyers, who decide where to place ads to target the right audiences.
Research firm Forrester said last year that automation could eliminate some 33,000 jobs, or almost 8% of the workforce, at ad agencies by 2030, with various forms of AI being responsible for a significant portion of these losses.
Interpublic and WPP are struggling to keep pace with rival Publicis, which adapted faster to the technological shifts that reshaped how brands connect with consumers. The Paris-based firm has spent billions on buying data and e-commerce companies. It has also targeted companies that specialize in digital transformation advisory work to better position it against consulting firms with a growing presence in the advertising and marketing business.
The approach has led to a hot streak of winning new business from companies including Pfizer, Hershey, Lego and media and entertainment giant Sky. It has also helped make Publicis the most valuable company in the sector, with a nearly $28 billion market cap.
Omnicom has mainly stuck to smaller deals and building up some tech offerings organically. Earlier this year, though, it signaled a change in its approach and shelled out $835 million for e-commerce company Flywheel, its largest deal to date.
Interpublic has trailed its rivals, losing business from big clients such as Pfizer, Verizon, Spotify, and BMW. It most recently lost the bulk of its most lucrative account, Amazon ad buying assignment, which was split between Omnicom and WPP.
Krakowsky has been actively shopping Interpublic and parts of the conglomerate for more than a year and talking to a range of parties, including private-equity firms Apollo and KKR, according to people familiar with the talks. The company has also enlisted McKinsey to help with a restructuring and cost-cutting initiative, according to people familiar with the matter.
Interpublic has sold off some creative and underperforming agencies, so it can invest more in technology and build a larger practice in so-called principal buying, a high-margin business in which agencies buy ad inventory and take ownership of the ad space, then resell it to brands. Traditionally, the companies would buy ad time and space on behalf of a brand, acting as an agent for the advertiser. Both Publicis and Omnicom have thriving practices in this area.
A deal between Interpublic and Omnicom would likely face government scrutiny, as the combined company would be a dominating force in the ad-buying space. Global ad spending is expected to top $1.03 trillion, excluding political advertising, according to GroupM, the ad buying arm of WPP.