| WASHINGTON/BRUSSELS, July 29
WASHINGTON/BRUSSELS, July 29 Publicis
and Omnicom will most likely have to shed some assets in
order for their mega deal to win approval from regulators in the
United States, Europe and 40 other countries where they operate.
The deal would combine the world No. 2 agency, Omnicom, with
the No. 3, Publicis, to create the world's largest agency. The
companies have expressed confidence that the transaction will
Four antitrust enforcers polled by Reuters said they thought
the deal would be approved, but require some asset sales to
restore competition, while three others were more cautious over
the regulatory outcome given the complexity of the deal.
Publicis Chief Maurice Levy defended the merger as necessary
in a changing, increasingly electronic landscape.
"This is a new company for a new world," Levy said. "It will
be able to face the exponential development of new Internet
giants like Facebook and Google, changing consumer behavior, the
explosion of big data, as well as handle the blurring of roles
of all the players in the market."
There are other large advertising firms. The current leader
is WPP, and there are three other major firms in the
industry - U.S.-based Interpublic, France's Havas
and Japan's Dentsu, as well as many smaller
In Brussels, antitrust experts said the deal would be
difficult for enforcers to review.
"The companies claim to have complementarities, both
geographically and in terms of activities. This might well be
true but there will be significant overlaps in many relevant
markets," said Brussels-based antitrust lawyer Salomé Cisnal de
Ugarte of Mayer Brown.
"It remains to be seen how big the combined market shares
are and whether the European Commission can remedy potential
competition concerns by requesting divestments or behavioral
commitments," she said.
Brussels-based Jacquelyn MacLennan of White & Case LLP was
one of several antitrust experts who predicted one or more
segments of the companies could be sold off.
"This could be a tricky transaction for regulators. The
companies have so many wide-ranging activities. Every time there
is a mega-merger there are likely to be competition issues and
the Commission will be more cautious," said MacLennan.
Competition issues could focus on whether the companies are
competing head to head in relevant national markets. "If there
are problems the parties may propose sell offs - such as certain
local agencies for example," MacLennan said.
The new company - Publicis Omnicom - will be traded in New
York and Paris. The company, which would have combined sales of
nearly $23 billion and some 130,000 employees, brings together
Publicis brands such as Saatchi & Saatchi and Leo Burnett with
Omnicom's BBDO Worldwide and DDB Worldwide.
Experts said the main competition issue is likely to be in
media buying, which is where agencies purchase advertisements in
various formats - such as television or print - on behalf of
Pivotal Research analyst Brian Wieser estimated that
Publicis Omnicom would account for almost 20 percent of global
media spending and closer to 40 percent in the United States.
To allay such concerns, the companies might have to sell
small brands in some countries, said a person close to the
A U.S.-based antitrust expert predicted the deal would win
Washington's approval since it would leave large firms with a
smaller U.S. presence - Havas and Dentsu - that could expand.
"The antitrust issues are being exaggerated and (the
deal)faces minimal risk," said the expert, who asked to speak
privately for business reasons. "It's not like AT&T and
T-Mobile," he said, referring to the failed 2011 attempt to
merge the two telecom companies.
But he added winning antitrust approval from dozens of
countries would be time-consuming, and that China was likely to
be the last to finish the process.
Evan Stewart, an antitrust expert with New York's Zuckerman
Spaeder LLP, said that if the merger went forward and clients
were hurt, new agencies would rise up to compete.
"Somebody can set up a competing agency with six guys and
gals in a garage. You don't need steel mills and iron ore boats.
You don't need any of that stuff," he said. "I don't see any
antitrust issues; I don't see consumers being hurt here."
But Bert Foer, head of Washington, D.C.-based American
Antitrust Institute, said the vast combined company would have
too many fingers in too many strategic business pies. Asked
about regulatory approval, he said: "I don't think they should