How Omnicom’s purchase of IPG changes the notion of an agency holding company

By Ronan Shields • January 2, 2025 •

Ivy Liu

Omnicom’s proposed acquisition of IPG, announced last month, would make it the world’s largest agency-holding company, with $25 billion in annual ad revenue and over 100,000 employees.

The deal aims to generate $750 million in cost synergies, primarily by consolidating back-office functions and reducing redundancies by potentially cutting 30% of staff. A depressingly familiar page in the corporate playbook.

However, the initial pitch from IPG and Omnicom’s executive teams focused on other outcomes, such as AI and the combination of both entities’ big bets in data-enabled marketing.

Below is a compilation of the proposition’s core aspects, including potential downfalls that aren’t necessarily featured on the pitch deck (see bullet points below).

Additionally, read further below for insider observations likely to keep clients and investors stroking their chins over the finer points involved in such a market-making move.

Arguments for the union

Scale advantage: By merging, Omnicom can compete more effectively with Publicis Groupe and WPP, leveraging efficiencies in technology, real estate, and shared services.
Market differentiation: Integrating platforms like Omnicom’s Flywheel and IPG’s Acxiom offers unique capabilities, particularly in retail media and AI-driven advertising, appealing to modern marketers.

Financial growth: With organic growth in advertising challenging, the merger provides opportunities to boost shareholder value through cost reductions and expanded offerings.
Client-centric strategy: Omnicom’s leadership emphasized new opportunities for talent and clients, ensuring tailored solutions at a global scale.

Arguments against it

Operational complexity: Combining two large entities could create inefficiencies and distraction, affecting client relationships and service delivery.
Loss of talent: Cultural mismatches and perceived bureaucracy may drive talent to independent agencies.
Limited global reach: Both companies’ U.S.-centric nature may hinder growth in underrepresented regions like Asia and Europe.
Client conflicts: Overlaps may force some brands to switch agencies, disrupting partnerships.

The proposed merger marks a critical moment for consolidation in the advertising industry, though its success hinges on execution and market response.

According to sources approached by Digiday, in an era when the growing popularity of AI challenges the traditional business model and value proposition of holding companies, IPG and Omnicom are doubling down on scale.

Some were keen to point out how the importance of scale is not just confined to the traditional media agency buying model; this is because scale is now critical to the training models of the AI investments both outfits were keen to trumpet in the initial pitch material for the consolidation move.

Ebiquity CEO Ruben Schreurs told Digiday the development underlined how all holding companies in the space would have to answer to the markets, “What are you?”

He adds, “They’re all investing heavily in the concept of being a ‘principal,’ therefore, the notion of being ‘an agent’ goes out the door, even though they claim it can go hand-in-hand.”

For some, the “platform not a holdco” vision of both Omnicom and IPG CEOs might resonate, particularly with some CMOs. The promise of a heftier, principal-based buying unit could appeal to marketers who’ve made their peace with agencies operating in what might generously be called transparent opacity.

The notion of being ‘an agent’goes out the door, even though they claim it can go hand-in-hand

Ruben Schreurs, Ebiquity

However, Nick Manning, an executive with vast experience having advised CMOs at both Ebiquity and MediaLink, as well as the founder of Manning Gotlieb OMD, told Digiday that principal-based buying could be at the core of its investment thesis.

“IPG has been slow to embrace it, even though its Orion unit has been doing it for a long time… I think they’ve been forced to do more by the markets as they’ve seen Publicis and Omnicom were… and making significantly better margins,” he adds.

Although the value of principal-based trading will erode over time with Manning commenting that Omnicom is simply “buying a worse version of themselves” unless it can make the most of IPG’s investments in recent years.

Sources noted how the prospect of an expanded Flywheel — the retail media arm purchased by Omincom for $835 million in 2023 — might spark interest among marketers investing in retail media as a cornerstone of their first-party data strategies.

Although this may appear idealistic on a pitch deck, several practitioners told Digiday the actual execution is likely to be much more complicated given the ‘mixed’ results of the attempted integration of Acxiom into IPG after its 2018 purchase.

CheckMyAds’ Arielle Gacia (a former IPG employee by way of her time as privacy chief at UM) observes how IPG “hasn’t been able to thread the needle on justifying that [$2.3 billio] investment.”

Garcia further contests the notion Acxiom has a wealth of first-party data, contending that it is a “third-party data broker,” a notion backed by two other experienced agency execs consulted by Digiday who have direct experience working with IPG-unit.

However, it is in recent filings in a lawsuit where IPG’s Acxiom and Kinesso units are in the dock that this element of the investment thesis, arguably, faces its biggest stress test.

In it, plaintiff Adstra alleges misuse of its data by the IPG duo to build competing identity products, with the outcome potentially impacting Acxiom’s data strategy, financial standing, and integration into Omnicom’s ad tech stack, according to some.

But for now, it’s all conjecture. Nothing is set in stone, and a sea of ifs, buts, and maybes lies ahead. Which is to say, marketers are stuck in their all too familiar position: waiting to see how the chips fall.

Management at both Omnicom and IPG are aware of this, plus lessons of the past will linger long in the memories of executives at the acquiring party after its earlier proposed merger with Publicis was felled by structural complexities.

“They’re trying to change a legacy model towards a non-legacy model, which is very hard to do,” concludes Manning, “but they’ve got to do it because that’s that’s the only way that they can survive.”

https://digiday.com/?p=563870