Omnicom to buy Interpublic, creating world’s largest ad agency

Omnicom Group agreed to acquire Interpublic Group on Monday in a $13.3 billion deal that combines two of the world’s largest advertising groups.

Why it matters: The merger, which would create the world’s largest ad agency, comes as the industry faces challenges from generative AI and other technological shifts.

Driving the news: Omnicom said the deal is a stock-for-stock transaction where Omnicom shareholders will own 60.6% of the combined company and Interpublic shareholders will own 39.4%, on a fully diluted basis.

• The total value of the deal is $13.3 billion, excluding debt, based on Axios calculations.
• The transaction is expected to generate annual cost synergies of $750 million, and to close in the second half of 2025.
• Omnicom CEO John Wren will serve as CEO of the combined entity. Interpublic CEO Philippe Krakowsky and Interpublic COO Daryl Simm will serve as co-presidents and COOs.

By the numbers: Omnicom is the third-largest advertising holding company globally by revenue, reporting $14.7 billion in 2023 and followed by IPG at $10.9 billion. WPP and Publicis Groupe are the two largest at $18.5 billion and $15.8 billion, respectively.

Flashback: It’s been over a decade since two major holding groups tried to combine. Omnicom and Publicis announced a merger in July 2013, but it fell apart less than a year later.

Zoom in: Omnicom’s continued growth has provided buying leverage in deals. Last year, it acquired digital commerce company Flywheel Digital for $835 million. Omnicom’s market value is $20.2 billion.

• “Omnicom is currently on a winning streak with clients and gaining market traction, so ensuring this integration doesn’t become a distraction will be critical,” said Andrea Kerr Redniss, managing director at MediaLink and partner at UTA.
• IPG, which has a market value of nearly $11 billion, has struggled to grow revenues and has been offloading some assets to invest in digital growth. Just last week, IPG announced it sold digital experiences agency Huge to private equity and acquired retail analytics firm Intelligence Node.

Zoom out: The rise of AI has further disrupted the business models of large advertising holding groups.

• More brands have been relying less on ad agencies and bringing ad-buying in-house thanks to stronger self-serve platforms and AI tools from large tech companies like Meta and Google.
• The ad holding giants also are competing with smaller agencies that can provide faster and cheaper AI services and intelligence.

What to watch: The combination could usher in more consolidation. Ad tech M&A recently has ramped up amid upbeat growth forecasts.

• “We can’t imagine that antitrust issues would be significant here, if only because they weren’t in 2013 when Publicis and Omnicom attempted to combine, and it’s not likely that the incoming U.S. administration seems likely to be more restrictive on agency M&A,” said Brian Wieser, a principal at media advisory firm Madison and Wall.

(Source: Axios)