Contact: Tejas Venkatesh
Traditional advertising firms Publicis Groupe and Omnicom, which together generated $22.7bn in revenue last year, are combining to become the biggest advertising company in the world. The blockbuster consolidation comes as advertising increasingly moves online, a transformation that threatens the entire media landscape. In many ways, advertising has become more Silicon Valley than Madison Avenue – a key point that executives from both Publicis and Omnicom said drove the deal.
Both firms have used M&A in the past – albeit on a much smaller scale – to try to stay relevant as ad dollars go to digital outlets. For the most part, recent deals at both Omnicom and Publicis were driven by technology gaps, with geographic expansion also spurring some acquisitions. That has led to a flurry of transactions at Publicis. According to The 451 M&A KnowledgeBase, Publicis inked 16 deals in the past 24 months. (During the same period, Omnicom acquired only three companies.)
While Publicis and Omnicom focus on the complex task of trans-Atlantic integration, we suspect the pace of M&A at the soon-to-be-formed giant will slow. But eventually, we expect the company to step back into the market as it realizes that even with the sprawling portfolio, it still lacks the necessary technology to keep pace in a digital ad world. After all, even Google – the dominant online advertising company, and one that’s native to the digital world – has had to spend billions of dollars on dozens of deals (DoubleClick, AdMob, Wildfire Interactive, etc.) to round out its own portfolio.
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