Omnicom’s Interpublic ambition: A deal that could redraw advertising’s power map

The news that Omnicom is close to a deal to acquire Interpublic might well be termed a "Sunday Night Special," given the shockwaves it sent through the advertising industry. It’s also a testament to both parties’ ability to keep the proposed deal under wraps until now. For someone with a reputation for avoiding large acquisitions, Omnicom CEO John Wren appears to be warming up to The Art of the Deal, as U.S. President Donald Trump might say.

If the deal goes through—which is not guaranteed, given the usual hurdles, including regulatory scrutiny—the implications are obviously significant. However, I don’t believe it will fundamentally change the dynamics of the industry on its own. The greatest overlap between the two companies lies in creative work, not media, where Interpublic is relatively small, especially after losing the global Amazon account. While this isn’t insignificant, the creative sector has the lowest barriers to entry, making it easier for new agencies to emerge.

One question worth asking is whether any other bidders will emerge for Interpublic. There are three obvious candidates: Publicis, WPP, and Accenture. I suspect none of these will step in. For Publicis, its current strategy is already proving successful, and Interpublic seems to offer little in terms of added value. While Omnicom may trumpet the benefits of acquiring Acxiom—particularly the integration of its data with recently acquired Flywheel—Publicis doesn’t need this. WPP, meanwhile, would likely need to launch a major rights issue (as would Publicis) to fund an acquisition of Interpublic, and there seems to be little appetite for this among shareholders. Accenture has the financial means to make a bid—and this could be a make-or-break moment for it to catapult itself into the top ranks of the industry—but I suspect it will ultimately decide against taking such a big leap. That said, I’m least confident in predicting Accenture’s course of action.

A second question is whether this is primarily a cost-synergy-driven deal or one that Omnicom sees as unlocking significant new revenue opportunities. In my view, it leans more toward the former. Outside of the potential Acxiom-Flywheel benefits, I don’t see how this deal will significantly enhance Omnicom’s ability to generate revenue, apart from a modest reduction in competition in the media sector. On the other hand, the cost synergies are likely to be immense, spanning areas like property, back-office operations, and, of course, staff reductions.

A third—and perhaps the most interesting—question is what this deal means for the rest of the industry. For Publicis, I don’t think it changes much; its current strategy is already proving effective. However, at the mid-tier level, this could accelerate consolidation among smaller players. For instance, could Dentsu decide this is the right moment to sell off its international assets? The two groups most affected, in my view, will be WPP and Accenture. For WPP, a successful Omnicom-Interpublic deal would leave it as a somewhat distant third to the two major "superpowers," forcing it to reevaluate its positioning and strategy. For Accenture, as noted earlier, this might be the moment it has to decide on its ultimate goals in advertising.

As always, this is not investment advice.

Ian Whittaker is the founder and managing director of Liberty Sky Advisors. He writes regularly for Campaign about the advertising landscape from a financial standpoint.