Omnicom Group is in advanced negotiations to acquire direct U.S. rival Interpublic Group in a deal that could merge two Madison Avenue giants and fundamentally recalibrate the advertising industry as it grapples with the ongoing decline of many of its traditional practices.
The two companies could announce as early as Monday that Omnicom plans to purchase Interpublic in an all-stock deal that could value the latter at between $13 billion and $14 billion without debt, according to a person familiar with the situation.
Representatives for Omnicom and Interpublic did not respond to queries seeking comment. The Wall Street Journal previously reported on the pact.
The pact will bolster Omnicom’s standing among a handful of large holding companies that dominate the sector, but have been struggling to develop new lines of revenue as the industry’s best-known products — glitzy TV commercials and print ads — are seen as less effective in spurring consumer purchases and response. Omnicom is known for its longstanding relationships with blue-chip marketers such as PepsiCo and Apple, and houses units such as BBDO, TBWA Worldwide and Omnicom Media Group. While it has only infrequently been seen as blazing new frontiers in digital practices, it closed a deal in January to buy Flywheel, a specialist in digital commerce.
Interpublic, meanwhile, has worked to build up new competencies in digital marketing and mining the consumer data that often comes with it. Under CEO Philippe Krakowsky, Interpublic has been shedding some of its traditional agencies, such as Deutsch New York, Hill Holliday and Huge, while buying up the bulk of Acxiom Corp. in 2018 and, more recently, acquiring Intelligence Node, a specialist in retail data.
The companies may not have much overlap when it comes to clients. Interpublic once served as a big home to clients such as Coca-Cola and Amazon, but many Coke accounts have migrated to the agencies of U.K. ad giant WPP, while Interpublic lost Amazon’s massive media business earlier this year to WPP and Omnicom.
“There is tremendous industrial logic to two large agency groups combining,” said Brian Wieser, an industry analyst, in a research note issued Sunday. In addition to cutting back-office costs, he said, “the removal of one significant globally capable agency group would help improve competitive dynamics in the favor of all agencies when large clients seek to play agencies against each other in order to drive pricing for services down.”
Both companies recently had an occasion to work together, with Interpublic, Omnicom and French rival Publicis Groupe all agreeing to acquire a small interest in the ad-tech firm Mediaocean, which helps advertisers and agencies monitor invoicing and payments for their purchases of media inventory in which they can run their commercials.
Omnicom has explored mergers in the past. In 2013, Omnicom and Publicis struck a deal to merge, but the agreement unraveled months later over disputes over which management group would oversee a combined entity.
Combining Omnicom and Interpublic would mark an achievement for Omnicom CEO John Wren, who has presided over the marketing-services giant for decades, and would, through the deal, create a formidable rival to WPP and Publicis. A bigger Omnicom would also gain new leverage with both the marketing giant it serves and the media outlets with which it negotiates to place ads and promotions.
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