Analysts question proposed €26bn merger of advertising giants
QUESTIONS have been raised about the proposed €26bn merger between two of the biggest advertising and PR groups in the world, as competition authorities around the globe get ready to probe the deal.
France's Publicis and US giant Omnicom said on Sunday they would combine to create a business with 130,000 staff and revenues of about €18bn a year.
However, market watchers are querying whether the deal will ever happen due to the reach of both firms.
Bill Kinlay, who heads the Irish arm of the media group Mindshare, said the logic of the deal was hard to see.
"In terms of media, we estimate the combined company would have about 40pc of the Irish market, so you'd imagine there will be competition issues around that," Mr Kinlay said.
"It's brave and a bold move. I think they are two very different cultures and it will be difficult to (combine them fully). It creates as many problems as solutions," he added.
Mindshare is owned by the conglomerate WPP and Martin Sorrell, the pugnacious head of the UK giant which will be overtaken as the biggest media group in the world by the merged businesses, also questioned the deal.
"In terms of size, at the end of the day, if you look at the geographies, it doesn't really create great scale except in the US and obviously the regulators are going to take a good hard look at that," he said.
Mr Sorrell's comments may be seen as a rival making mischief but analysts said the numerous entities involved and the need for regulator approval in 46 separate territories would mean any deal will take months to go through, if at all.
"In the US, we estimate that the combined entity has nearly 40pc market share and therefore may lead to some remedies being sought," said analysts at UBS.
"Client concerns and issues which may be raised by media owners could also delay the process," they added.
The merged business will apparently be run as two separate companies but will have a holding company in Holland. That move is because Holland is seen as a "neutral" country rather than for the numerous tax benefits available there.