Don Draper could only dream of such a trans-Atlantic union: U.S. marketing services giant Omnicom Group’s $35 billion all-stock tie-up with France’s Publicis Groupe is the biggest advertising deal in history. For Geoffrey Austin, the London-based managing director at independent advisory firm Moelis & Co. who represented Omnicom, the pending transaction caps a 15-year relationship with his client.
“The merger of Omnicom and Publicis involves two great companies coming together at nil premium to create an undisputed global leader in their industry,” says Austin, 48, who was head of European media at Deutsche Bank before he joined New York–based Moelis in 2010. “The transaction is complex, cross-border and required significant structuring work, as well as complete confidentiality before announcement.”
The deal creates an advertising powerhouse, allowing Omnicom and Publicis to leapfrog London-based WPP and become the world’s largest marketing and advertising group. It’s not just about bragging rights: The pair need scale to combat the dwindling power of traditional marketing communications in a digital world dominated by Facebook and Google. But rivals warn that the merger will create conflict and upheaval as the two houses try to bring competing clients such as Apple and Samsung Electronics Co. under a single roof.
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Austin met Omnicom CFO Randall Weisenburger in 1998, when he advised British advertising agency Abbott Mead Vickers on its sale to the U.S. giant. Needing a trusted adviser to help pull off the merger with Publicis, Weisenburger called Austin in March 2013. Publicis hired boutique investment bank Rothschild as its sole adviser in June, turning to managing directors Grégoire Chertok, Sébastien Proto and François Wat. The transaction yielded between $50 million and $70 million in fees.
Secrecy was crucial given the all-share structure: Any leak to the market would have affected both companies’ stock prices. Austin and his team, which included managing directors Andrew Haber in New York and Benoit Renon in London, confined negotiations with Publicis to a small circle. Because the deal required no financing, the advisers didn’t need to involve a wider group of banks.
With input from their firm’s founder, Kenneth Moelis, Austin and his colleagues crafted a merger of equals. The combined company will have dual headquarters and listings in New York and Paris but will be registered in the Netherlands, with Omnicom and Publicis each holding a 50 percent stake.
Omnicom president and CEO John Wren and Publicis chief executive Maurice Lévy announced the deal on July 28 with predictable fanfare by shaking hands atop Publicis’s Paris headquarters. Through late November, when Wren and Lévy said that regulatory approval may not come until the second quarter of 2014, Omnicom and Publicis stock had climbed 10 percent and 9.5 percent, respectively.
($ Millions) *
|1||U.K. bank Barclays follows a £5.8 billion ($9.1 billion) rights issue with a $2 billion hybrid bond offering.||$1832|
|2||Warren Buffett’s Berkshire Hathaway and Brazilian investment firm 3G Capital pay $27.4 billion to take ketchup maker H.J. Heinz Co. private.||$97–107|
|3||U.S. telecom Verizon Communications agrees to give Vodafone $130 billion for the British carrier’s 45 percent stake in Verizon Wireless.||$93–103|
|4||Founder Michael Dell and Silver Lake Partners privatize U.S. computer maker Dell for $24.9 billion.1||$82–92|
|5||Brazilian phone company Oi and Portugal Telecom agree to a $15.7 billion tie-up under the former’s name.||$70–90|
|6||Cable giant Liberty Global buys the U.K.’s Virgin Media for $25.5 billion.||$882|
|7||Advertising firms Omnicom Group and Publicis Groupe agree to a $35 billion Franco-American merger of equals.||$50–70|
|8||Social media company Twitter launches a $2.1 billion initial public offering on the New York Stock Exchange.||$682|
|9||China’s Shuanghui International Holdings closes a $7 billion buyout of U.S. pork producer Smithfield Foods.||$51–61|
|10||iPhone maker Apple issues $17 billion worth of bonds.||$532|
|* Estimates unless otherwise noted. M&A totals only include advisory fees;|
debt and equity totals only include underwriting fees.
1 Deal value provided by Dell.
2 Publicly disclosed.
|Source: Thomson Reuters/Freeman Consulting Services.|