Omnicom-IPG merger marks ‘digital revolution’ for comms industry

Omnicom Group’s acquisition of Interpublic Group (IPG) will create a behemoth in the communications industry.

The combined entity, operating under the Omnicom banner, will boast over 100,000 employees and an extensive client roster, promises significant shifts in the industry landscape. Short term, the move will give the company the scale to increase their digital and AI investments to compete with Publicis and WPP.

“Omnicom and IPG are betting that their combined scale will give them … more leverage with tech providers, and with their media buying and planning,” said Anthony D’Angelo, chair of the Public Relations Department of the Newhouse School at Syracuse University.

But the merger, valued as a stock-for-stock transaction, may have a significant impact on smaller and mid-sized agencies as well as communications professionals. In light of recent restructuring by Edelman, there are fears that this merger may lead to an unknown number of additional layoffs for PR professionals in the name of cost savings and operational efficiencies.

“This is indeed a big deal,” D’Angelo said. “It’s reflective of how digital and AI technologies are fundamentally changing the way agencies operate and compete.”

Significant changes to the industry

In their joint statement , Omnicom and IPG underscored the complementary nature of their offerings, describing the merger as a way to provide “comprehensive, full-funnel marketing solutions” to their clients. The combined company aims to enhance its capabilities across media, CRM, data analytics, digital commerce, healthcare, public relations, branding and advertising.

The merger will almost certainly face regulatory scrutiny and will likely not go through until the second half of 2025.

“They’re optimistic, especially with an incoming Republican administration, but international regulatory approval is another matter entirely,” D’Angelo said. The New York Times reported that that President-elect Donald Trump’s pick to lead the Justice Department’s antitrust division, Gail Slater, indicates he looks to continue the Biden administration’s tough stance on tech industry deal-making.

Assuming the merger takes place, Omnicom predicts $750 million in annual cost savings through streamlined operations and resource consolidation, according to John Wren, Omnicom’s CEO and chairman. Wren, who’ll oversee the merged company, expects the move to generate “significant free cash flow,” enabling further investments and acquisitions.

While those cost savings represent significant benefits to Omnicom’s shareholders, achieving them will likely create significant disruptions in the communications industry. Layoffs are a distinct possibility, D’Angelo said.

“It makes one wonder about redundancies and potential office closures,” he added. “That’s often the case in consolidations of this scale.”

Omnicom didn’t mention layoffs in the merger announcement, but Aaron Kwittken, founder of PRophet and a former PR agency leader, believes there will be some when the dust settles on the move. He thinks the deal could lead to thousands of layoffs, mainly to eliminate redundant positions. While Kwittken believes most of the affected jobs will likely be non-client-facing roles, such as human resources, legal, finance, and accounting, he also suspects that some communications staff will lose their jobs as well.

Michelle Edelman, CEO of New Orleans-based agency Petermayer, said the size of the yearly cost savings “boggles the mind.” The leaders of the companies described the merger in “Wall Street terms, not Main Street terms,” she said. To her, that means the consumer isn’t really a factor in how these companies are thinking about their products and services.

“I assume that combining the IP and technology of both companies will allow them to build a higher return for their investors,” Edelman said. But she expressed concerns about the “human impact” of the deal.

“(Clients) need their third-party partners to have their back and bring them relevant solutions that meet them where they are and pull them forward,” Edelman said. “That’s not just a product and service job – that’s a distinctly human job.”

Edelman said she believes the assumption is that there will be a “massive turnover of jobs and people shifting at all levels through their portfolio. Those human trust relationships will be tossed up in the air at the very moment our clients need them most.”

Challenges for new-look Omnicom

Kwittken, who sold his agency to Stagwell  in 2010, advises Omnicom and IPG to reassure their clients that their established teams aren’t changing and this move will only improve the services they provide. It may also end some of the internal “jockeying for position” and politics from staff that stem from rumors and speculation related to the merger.

“It’s an assurance that your team is here, that nobody’s going anywhere and that you were made our number one priority,” he said. “If it’s done really well, the client should never see any of the sausage being made.”

D’Angelo noted that speculation already exists that this deal signals the start of a fundamental choice clients will have to make in the future – signing on with a specialty boutique or a giant holding company.

“Clients may ask if they’ll get the same level of attention from the larger entity, particularly from senior executives,” D’Angelo said, adding that there may also be client conflicts within the new organizational roster that may cause some clients to move elsewhere, along with agency employees.

A new landscape for smaller, mid-sized agencies

Amid the upheaval, Edelman sees this as a pivotal moment for smaller and mid-size agencies. The changes will push them to keep pace technologically in order to remain competitive, she said. But it also represents a great opportunity for support companies to create tech optimizations for smaller firms.

“Where scale and numbers can’t be a point of difference, so much else can be,” she added.

While Edelman thinks this new landscape will pose some challenges for smaller agencies, she also sees options for those that can adapt quickly.

“Clients need human trust relationships more than ever,” she said, describing the future “Team Omni-IPG” as a group of “handpicked people thrown together for a pitch, who have just exchanged business cards a couple hours before.”

Edelman believes the changing landscape represents a time for clients to think about what they want and need in a long-term agency partner – “and why this all matters for the most important person in the equation: the consumer.”

“I love that the big will get bigger and the small will get scrappier,” she added. “Let the future begin.”

Casey Weldon is a reporter for PR Daily. Follow him on LinkedIn.