Publicis-Omnicom Merger May Face Cultural Integration Challenges

The merger between two advertising giants Publicis Groupe and Omnicom Group has caused quite a stir. The two companies combined to form Publicis Omnicom Group would have stock-market value of $35.1 billion, making this the largest advertising merger ever.

Although Chief Executive Maurice Levy and CEO John Wren both stress this is a “merger of equals,” there are still questions about how the cultures of these two companies will mesh.

As large companies each naturally has its own corporate culture. There is also additional pressure since this is a cross-border transaction. Publicis Groupe is headquartered in Paris and Omnicom in New York. As The Wall Street Journal reports, past French-U.S. transactions have ended in corporate paralysis or faced issues due to strong nationalist sentiment. Earlier this year, the French government prevented Yahoo from acquiring online video site Dailymotion.

In my experience I find cultural integration is sometimes an overlooked aspect of integration, despite its vital importance to the newly merged entity. Culture can encompass a variety of issues – from dress code, to vacation policy. How these practices change (or don’t change) can have a profound impact on employees, productivity and the overall attitude. Many of these issues touch on employee interaction, a compelling reason for executives to focus on a smooth cultural integration.

Differing cultures also affect the executives of a company. Both Mr. Levy and Mr. Wren have stated they will be “co-CEOs” of Publicis Omnicom Group. Their ability to understand and develop a unified strategy will be important for leading the company in the future.

For those of you considering acquisitions, I recommend you assess your culture and the culture of your acquisition target early on in the M&A process. You should consider culture as you research companies, interact with employees, and meet with the owner of the prospect company. These interactions will give you further insight into the culture and an understanding of how the two entities can meld together as a cohesive unit. The success of the newly formed Publicis Omnicom Group will depend largely on cultural integration.

2 comments

    • Parixit on May 2, 2014 at 3:31 pm

    Reply

    Hi David,

    I have the same concerns about this merger and it seems that these issues are certainly surfacing currently. Since none of this inside information comes out in the open, it becomes increasingly difficult to identify the real cross cultural issues.

    I am very curious to know what you feel is the inside story and what major differences do you feel exist culturally in these two organizations?

    1. Reply

      Hi Parixit

      While I have no access to the “inside story” of the Publicis – Omnicom deal, as I mentioned in the post, integration to be one of the most challenging part of acquisitions. This is especially true if buyer and seller do not share the same strategic vision. It’s one thing to talk about synergies that will result from a merger, but if leadership can’t come to an agreement, the merger will not be successful. According to reports, both Publicis and Omnicom have strong corporate cultures and could not agree on top leadership positions. This “merger of equals” reminds me strongly of the wording used in the AOL-Time Warner deal, which as we all know turned out to be a disaster. Perhaps it’s best that Omnicom and Publicis have decided to go their separate ways.

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