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Publicis/Omnicom Merger Collapses Due to Emotion, Says WPP

Stocks in this article: OMC PUBGY WPPGY HCMLY LFRGY LRLCY PG

NEW YORK (TheStreet) -- It's never good to let emotions take over in business. Especially when those emotions grow larger than the issues at hand.

Ego-driven insecurities sabotaged rational decision-making and led to the collapse of the much-awaited Publicis (PUBGY) - Omnicom (OMC - Get Report) mega-merger, according to rival ad giant WPP (WPPGY) and other internal sources familiar with the situation.

The $35 billion deal, first announced last July with much gusto as a union of equals that would offer a 50-50 ownership split in equity in the new company, was called off on Friday morning due to cultural differences and a lack of consensus on various factors including the appointment of a Chief Financial Officer to push the deal through.

"The challenges that still remained to be overcome in addition to the slow pace of progress created a level of uncertainty detrimental to the interests of both groups and their employees, clients and shareholders. We have thus jointly decided to proceed along our independent paths. We, of course, remain competitors, but maintain a great respect for one another," Maurice Levy, CEO and Chairman of Publicis, and John Wren, CEO and President of Omnicom, said in a joint statement on Friday.

Martin Sorrell, CEO of multinational behemoth WPP, said In an interview with Ad Age, Martin Sorrell, CEO of WPP, said that he saw the proposed merger -- and its collapse -- as "an emotional decision." He added, "Any deal was doomed to fail."

Sorrell sounded pleased that the world's second- and third-biggest advertising companies would not displace WPP from its No. 1 position any time soon.

Tensions between Publicis and Omnicom had been brewing over the past month, owing to concerns over leadership and strategy. But the first red flag was Omnicom CEO John Wren's misgivings about the deal in late April, when he began citing tax and antitrust complications involved in securing approvals from regulators in Europe.

The Publicis-Omnicom merger would have heralded the largest global and multi-channel media and communications empire. It would have brought some of Madison Avenue's grooviest ad agencies -- including BBDO, TWBA Worldwide and Publicis's Leo Burnett, Saatchi & Saatchi, MSL, and Starcom Mediavest -- under one roof, with a sophisticated client mix involving crown jewels like L'Oreal (LRLCY), and Procter & Gamble (PG).

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