PharmExec Blog

Omnicom and Publicis: Musings on the Merger

With the pharma industry spending over $31 billion a year on product promotion, the melding of ad giants Omnicom and Publicis beckons a closer look. The two holding companies lent ink to their union in Paris at the end of last month. Since then, a number of perspectives on the deal have surfaced, many of which cast this merger of equals as a novelty inducement that tracks the globalization of business generally.   For pharma specifically, the conclusion is that this is pretty much business as usual. Small, independent agencies will still offer quality for comparable prices, while clashes between brands within the larger framework of this new media amalgam will be settled with the help of intermediaries. Over time, however, the key factor for pharma clients is to avoid the prospect of becoming associated with the bloat of an inhibitory bureaucracy, one that shunts new ideas aside in the interest of preserving organizational prerogatives.

While much of the press has focused on the potential for conflict, , competing brands that find themselves bedfellows to their rivals as a result of the merger needn’t be concerned. As Jay Carter, Senior Vice President at Abelson Taylor points out, “One of the first things holding companies do is to make sure to manage their way through conflicts by placing businesses within units that manage conflict well.”  On the other end, smaller agencies needn’t be concerned either about more competition, price or otherwise. “The merger will be a much more potent group to compete against the WPPs, IPGs, and Havas of the world in terms of possible consolidation, but on the agency level, at least 90% of new business pitches are won on quality—it’s still the driving value proposition,” he said.

Rob Dhoble, CEO of Adherent Health and Former President of Health division at Omnicom

Rob Dhoble, CEO of Adherent Health and former President of Health at Omnicom

But these two newlyweds are not out of the woods just yet. Rob Dhoble, CEO of Adherent Health and former President of the Health Division at Omnicom stressed that “For them to do a good balancing act, they shouldn’t meddle too much with the workings of the agencies in the field; if they do, they’re smoking cigarettes next to the gas can.” The reason, he continues, is that “Publically held agencies, unlike independents, are not as able to invest in talent and agency operations, as their profits are pooled at the holding company in the form of returns to shareholders. As clients drive down the price of agency services and raise expectations for innovative solutions and bottom line results, I’m not sure that a large holding company will improve service delivery at the individual client brand level.   In other words, the services innovation and operational synergies between Publicis and Omnicom must be large, meaningful and immediate for this merger to make sense to clients, their brand and agency staff.”

While fraught with potential pitfalls, this new marriage of holding companies might present some benefit to key staffers with strong client relationships, some of whom can leverage these contacts to start new agencies or join other shops. That talent exodus, which comes with any merger, might actually help raise the game for pharma companies seeking a change in direction. This may also be a teaching moment for clients to learn that bigger isn’t necessarily better.   In the end, ideas matter– and no amount of money, scale and reach will beat a great idea.

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