As Omnicom and Publicis merge, rivals prepare to snare clients

Reuters

By Kate Holton, Paul Sandle and Leila Abboud

BARCELONA, Nov 21 (Reuters) - Three major rivals toadvertising groups Omnicom and Publicis, whichare merging, say they are poaching work from the pair by luringclients who are unsettled by the $35.1 billion deal.

Market leader WPP, fourth-placed Interpublic Group (IPG) and Japan's fifth-placed Dentsu said theyhad either begun to win work or believed they could do so asmajor brands bristle at the coming together of the industry'ssecond and third largest players.

Also up for grabs, the three groups said, were the more than130,000 Omnicom and Publicis staff across five continents whocould defect as the two holding companies focus on stitchingtheir agencies into a new group.

"It certainly has disturbed the client base and it certainlyhas disturbed the staff," WPP Chief Executive Martin Sorrelltold the Morgan Stanley investor conference in Barcelona.

"Clients are not going to come out and say 'I'm firing anagency' because they merged. But if you watch the roomscarefully, there are changing patterns of distribution in thebusiness which will benefit us."

Omnicom and Publicis revealed plans to merge in July thisyear, sparking a scramble for their blue-chip clients who areworried the new firm might face conflicts of interest.

Without any defections, the Franco-U.S. giant would bringthe accounts of major competitors in a number of industries suchas Apple and Samsung, or Coca-Cola and PepsiCo, under one roof.

It will also bring together Publicis agencies such asSaatchi & Saatchi and Leo Burnett with Omnicom's BBDO Worldwideand DDB Worldwide.

DISRUPTION, CONFLICT

"When you have two companies of that size coming together,with different cultures, there's going to be disruption," IPGChairman and Chief Executive Michael Roth said. "And fromdisruption comes talent opportunity.

"There are still some conflicts out there that areunacceptable and we are a very viable candidate if that is anissue. We are ready, willing and able to step in."

Roth told the conference one of his agencies had recentlyhired "a number of very talented people" from the two merginggroups.

Omnicom Chief Executive John Wren and Publicis boss MauriceLevy told a room full of investors and competitors, includingSorrell and Dentsu's Tim Andree, that they had always expectedtheir rivals to step up the pressure.

The two men, relaxed and finishing each other's sentences,repeated their belief that the combined group would be able tobetter compete in a changing media landscape and said they hadreceived only support from their biggest clients.

The deal is due to complete in the first half of next year.

"I don't see any great threats coming from clientconflicts," Wren said, before asking Sorrell if he would like tojoin them on stage. "People have tried to promote that as anissue but that's not real in my opinion."

In the latest set of trading updates, WPP emerged as thevictor, reporting third-quarter organic growth of 5 percent,accelerating from the first half and outperforming Omnicom andPublicis who reported 4.1 percent and 3.5 percent respectively.

IPG reported like-for-like growth of 2.8 percent.

Also competing for work in this new climate is Dentsu, theJapanese advertising group that completed its acquisition ofBritish media buyer and planner Aegis earlier this year, toenable it to compete for global media accounts for the firsttime.

Andree said the group was growing rapidly, as its Japaneseclients now use Dentsu for international media work and as Aegisbrands move into Japan. It has also won clients that were new toboth groups.

"We've had some success when you look at our new businessrecord in the past quarter, we've had a high percentage of thatbusiness coming from Publicis Omnicom," he said.

"Anecdotally, clients are not really understanding thebenefits for them (of the merger). And that's always a dangerousposition to be in. (When we bought Aegis) we went out of our wayto communicate with the talent and leadership in the agenciesthat it was business as usual."

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