NEW YORK: A fresh wave of agency consolidation is expected following the decision by holding companies Publicis and Omnicom Group to call off their merger.
The two companies decided late on Thursday to walk away from the $35bn deal, agreed last year, after running into a number of hurdles.
Although no single issue has been blamed for the merger's collapse, reports suggest that relations between the respective management teams were not strong, and that no agreement had been reached on how to integrate the two companies. The deal had also run into tax and regulatory issues.
However, analysts expect that the deal's collapse will spark a fresh round of mergers and acquisitions within the marketing services industry.
"M&A and consolidation is still on the table, but now there are more potential flavours," Brian Wieser, senior analyst at Pivotal, told Reuters. Likely targets include holding groups Interpublic Group or Havas, or agencies within them.
According to Wieser, Publicis remains keen to expand by acquisition. Japanese holding group Dentsu, which purchased Aegis in 2012 for $5bn, is also thought to be interested in further acquisitions.
"We've essentially tossed the salad up in the air," Wieser told the New York Times.
The stated motive for the merger was to gain greater scale in technology and data, and build an agency business that could better compete with technology giants such as Facebook and Google. Tech companies such as these have access to rich consumer data, and are increasingly selling their services direct to clients.
Another driver for consolidation is the growing pressure from clients for agencies to reduce fees and other costs.
The merger would have led to a number of high-profile conflicting accounts being held by the same holding group – a notable example being Coca-Cola (handled by Publicis agencies) and PepsiCo (handled by Omnicom agencies).
When the merger was announced, Warc used data from the Effie Effectiveness Index to show how the resulting company would have been a dominant force.
The merged company would have topped the Index, which measures performance in Effie competitions, in every geographic region.
Data sourced from New York Times and Reuters; additional content by Warc staff