November 14, 2018 / 6:18 PM / in a month

Publicis' chief sees consultancy and ad group merger wave

BARCELONA (Reuters) - Publicis’s (PUBP.PA) boss Arthur Sadoun predicted on Wednesday a wave of mergers between consultancy and advertising groups to keep up the race with U.S. tech giants online and offer end-to-end solutions to ever-more demanding clients.

FILE PHOTO - Arthur Sadoun, Chairman and CEO of Publicis Groupe, attends a conference at the Cannes Lions International Festival of Creativity, in Cannes, France, June 19, 2018. REUTERS/Eric Gaillard

Major consultants and IT companies such as Accenture (ACN.N), PwC, IBM (IBM.N) and Deloitte have made forays into the advertising business through costly acquisitions, notably in marketing, and by poaching top industry executives.

Further fuelling market expectations about potential tie-ups, the French ad giant’s digital branch Publicis.Sapient partnered with French consultancy group Capgemini (CAPP.PA) to win a big contract last year with fast-food chain McDonald’s (MCD.N).

“My prediction, I don’t know when it will come, is that you’ll see a first big move at some point,” Sadoun told the audience at the Morgan Stanley TMT Conference in Barcelona.

“The day it will happen, the market will change.” Like its main rivals Omnicom (OMC.N) and WPP (WPP.L), Publicis has to cope with the dominance of Facebook (FB.O) and Alphabet’s Google (GOOGL.O) online, even as the world’s biggest advertisers have been cutting ad spending and growing wary about the efficiency of ad campaigns.

This new competition has put pressure on margins and revenue, compelling advertisers to look for new technological tools to diversify their services toward e-commerce, customer experience and so-called big data.

Sadoun said Publicis was well-positioned, following the acquisition of a tech company in 2014 for $3.7 billion euros — a hefty price that largely contributed to a 1.4 billion-euro writedown last year.

The integration of the company within the holding company, which harbors several creative agencies, was painful, Sadoun said.

“The integration of Sapient has been a nightmare for Publicis and for Sapient,” he said. “When you bring together creative and tech ... it hurts at the beginning because the cultural shock is so big, it took three years (to integrate).”

Asked about the global ad market outlook, Sadoun remained cautious, saying t2019 should mark an improvement from 2018.

Reporting by Mathieu Rosemain in Barcelona; Additional reporting by Gwenaelle Barzic in Paris

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