* Shares in WPP, Interpublic, Havas leap on deal news
* Competing agencies will seek to poach big advertisers
* Conflicts possible in tech, telecom, autos
* Publicis, Omnicom say can manage conflict risks
By Kate Holton and Leila Abboud
LONDON/PARIS, July 29 A plan to merge Publicis
and Omnicom into the world's biggest
advertising group has begun a scramble by rivals to poach their
blue-chip clients worried the new agency might face conflicts of
Without any defections, the Franco-U.S. giant would bring
the accounts of major competitors in a number of industries such
as Apple and Samsung, or Coca Cola and PepsiCo, under one roof.
Publicis boss Maurice Levy and Omnicom's John Wren spoke to
some of their biggest clients before the $35.1 billion deal was
announced on Sunday, and made further calls on Monday to
reassure them they will be better served by the new group.
But rival chief executives from London to Paris and New
York, including WPP boss Martin Sorrell, were already
scouting on Monday for accounts to poach from the soon to be
formed group, industries sources said.
Under the planned deal, the French and U.S. groups will form
a giant that will have the necessary scale and investment
firepower to cope with rapid changes brought by technology on
the advertising business.
Rival ad groups have a rare opportunity to swoop as
contracts between major advertisers and agencies often include
clauses that say they can be renegotiated in the case of
agencies being bought or sold.
"It's good for us and other independents," said David
Kershaw, CEO of ad group M&C Saatchi. "It shakes out
more people that want great creative and global capability but
they don't want to be involved with one of these behemoths, and
also who feel uncomfortable having their competitors within the
same group," he told Reuters.
The merger will bring together Publicis brands such as
Saatchi & Saatchi and Omnicom's BBDO Worldwide and DBB
Worldwide, which could create new client clashes.
Levy and Wren said they did not expect any major problems
with big advertisers defecting to rivals, with the Frenchman
describing the reaction from clients as "extremely positive".
"We're going to work extremely hard to resolve any client
conflict issues with creative solutions," said Wren, adding that
he expected only roughly 1 percent revenue losses due to
potential contract losses.
Shares in rival ad groups leapt on Monday, in a sign of
their perceived opportunity and the prospects for further
consolidation in the industry.
Shares in WPP, currently the world's biggest ad agency,
opened up over 4 percent before settling back to be up 0.6
percent at the London close. Interpublic was up 8
percent on the New York stock exchange while France's Havas
was trading 5 percent higher.
"The deal should boost competitors' stock prices in the near
term, with billions of overlapping business up for grabs and the
industry consolidation story now having a greater sense of
urgency," said Steve Soranno, an equity analyst at U.S.-based
firm Calvert Investment Management. It has $13 billion under
management, including shares in Omnicom.
Don Elgie, the chief executive of the insight and digital
communications group Creston, said he expected to see a fall-out
from the tie-up.
"Communications groups are nothing without their clients,"
he said. "You could see massive swings in terms of clients
"They can't have talked to all their clients (and also) no
client is going to give a cast iron reassurance until they see
how the thing shakes out."
Three senior European advertising executives interviewed by
Reuters said areas of conflict within the new company could
include the consumer goods, tech and automobile sectors.
For example, Omnicom works for PepsiCo and Publicis
handles Coca Cola. In telecoms, Omnicom handles U.S.
leader AT&T and Publicis its rival Verizon.
Technology blue-chips are also an issue: Omnicom works for
Apple and Microsoft, Publicis for Samsung
BMW sales chief Ian Robertson said he had some concerns.
"We may be affected in some way in some country but it's too
early to say," he told Reuters. "Ideally, clearly we (would)
have that independence from other manufacturers. But in a world
which is now connected and there are so many mergers of this
type, maybe that's something that is not an ideal position."
Renault and Nissan were amongst the first big advertisers to
say they welcomed the deal.
"Renault and Nissan are both major global clients of both
Publicis and Omnicom. We welcome the direction taken by Publicis
and Omnicom to create a best-in-class communications,
advertising, marketing and digital services company and will
continue to work with them," a Nissan spokesman in Britain said.
As the two ad groups begin a round of meetings with
shareholders, the one area they are likely to focus on is the
advantage they will get in negotiating the pricing for ads with
the tech giants of Facebook or Google, and
investing in new software and data mining tools.
"Consolidation may help regain pricing power in a very
competitive industry," Morgan Stanley analysts wrote.
(Additional reporting by Rhys Jones and Paul Sandle in London,
Andreas Cremer in Frankfurt and Liana Baker in New York; Editing
by David Stamp)