Omnicom/Publicis Failed Merger Puts Spotlight on Interpublic

NEW YORK (TheStreet) -- Even the advertising sector is going to have trouble convincing investors that it's good news that the transatlantic merger of equals between Omnicom (OMC) and the French company Publicis (PUBGY) has collapsed. The combined company would have been the largest advertising company in the world.

Both Omnicom and Publicis have lost staff and clients who have become concerned about how they would fit into the enlarged group. Those clients will be hard -- if not impossible -- to encourage back.

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It would be wrong to assume this is the end of advertising sector merger-and-acquisition activity. With corporate clients becoming ever more global, the days of advertising companies focusing predominately on one geographic zone is over. The key is to bridge the personality issues and key managerial personnel choices well. Both of these issues apparently bedevilled the Omnicom/Publicis proposed link-up.

And this brings us to Interpublic (IPG), the second-largest U.S. advertising company, behind Omnicom. Interpublic's global ranking, however, is stuck at number five.

While Omnicom and Publicis were chasing dreams, Interpublic has been quietly getting on with it, noting in their most recent corporate report "a strong quarter in terms of organic revenue growth and earnings performance.... We believe that we remain well-positioned to meet or exceed our 2014 organic growth target of 3-4% and an operating margin of 10.3% or better." Interpublic also reported a further pay-down of debt and a continued buyback of shares -- both positive actions from a shareholder's perspective.

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