Omnicom and Publicis are close to striking a deal that would combine the two advertising giants into the world's largest advertising firm, according to media reports.
Such a merger would create a firm with a market value of more than $30 billion, surpassing London-based industry leader WPP PLC. A combined firm would allow for more pricing power, though the decrease in competition could present regulatory hurdles in the U.S. and Europe. Client conflicts also could arise.
Omnicom Group Inc., based in New York, owns BBDO Worldwide, DDB Worldwide Communications Group and TBWA Worldwide, among other agencies. Paris-based Publicis Groupe SA runs its namesake agency as well as Leo Burnett Worldwide, Saatchi & Saatchi and DigitasLBi.
An announcement is expected Sunday at Publicis' headquarters.
The possible merger would bolster both company's relatively weak presence in emerging markets, where they trail WPP, says James Dix, an analyst at Wedbush Securities, in an interview Saturday. It also would give Publicis, which is facing questions about who will succeed 71-year-old CEO Maurice Levy, access to Omnicom's well-regarded senior leadership, he said.
A major concern, though, is whether the two companies can strike a harmonious balance of power — something that can be difficult in mergers of similar-sized companies based in different countries.
"You have these fiefdoms that keep people from playing together. One company is based in Paris, one is in New York. Where is the power center?" Dix said.
Dix expects that top executives are comfortable with the structure of the deal, but the adjustment may be more difficult for the next level of executives who run the firms' units.
"Now they have to fit together into a broader organization," Dix said. "If you lose clients or have defections of senior executives then you have something that looked good on paper but didn't quite play out."
Spokespeople for Omnicom and Publicis couldn't immediately be reached for comment on Saturday. Bloomberg News first reported the talks aftermarket on Friday, citing an unnamed person familiar with the deal.