Omnicom's Interpublic Group buy to make it India's second-largest ad firm

The board of directors of the Omnicom group on Monday approved the acquisition of Interpublic Group (IPG), making it the largest advertising company in the world by revenue. Experts, however, say that in India, the acquisition will make it the second largest in the space on the basis of market share.

 

“Omnicom and IPG Mediabrands will become a strong number two company, with a brand share of 25.7 per cent, compared to GroupM’s (belonging to the WPP group) 35 per cent in India,” Sam Balsara, chairman, Madison World, told Business Standard. “I expect to see a significant change in the media landscape of the world. Though not on a similar scale, I do see several mergers and acquisitions of different sizes taking place, in bits and pieces,” Balsara added.

 

IPG has a presence in India through IPG Mediabrands India. Globally, WPP, Omnicom, Publicis Groupe, and IPG form the ‘Big Four’ of the advertising world.

 

Sandeep Goyal, chairman of Rediffusion, an advertising agency, corroborates Balsara’s view and says that he expects the combined entity to be the second largest after WPP in the country, but things could change in a few years. The acquisition will likely result in job losses in India, as peripheral or duplicate agencies within the network could be eliminated, he adds.

 

“A lot of common facilities tend to get merged (after acquisition) and, therefore, the direct impact in India is a likely loss of a large number of jobs. It can either happen in six months, or one year,” Goyal notes.

 

This step by the Omnicom group and IPG is primarily a financial merger aimed at cost-cutting and streamlining operations, he says.

 

“It’s about combining resources and right-sizing, which includes reducing overlapping operations and workforce. Some agency brands may vanish, but this won’t directly affect clients (under Omnicom and IPG), as services will be redistributed among remaining agencies,” Goyal explains.

 

Industry experts believe that GroupM has a monopoly in India’s advertising market right now. However, with the completion of the acquisition, they believe the combined entity can create a duopoly in India’s ad landscape.

 

While Balsara states that it is too early to point out which players could be impacted, Goyal says there is hardly any immediate impact on GroupM India but a long-term impact is possible.

 

From a global perspective, N Chandramouli, chief executive officer, TRA Research, says the acquisition of two giant advertising groups will create a powerful global company that will shake up the industry, making it harder for rivals like WPP to compete.

 

“By working together, these companies (Omnicom and IPG) can save money and improve efficiency, but merging such big groups always comes with cultural challenges,” Chandramouli adds.

 

This acquisition comes at a time when consolidations have already become a trend in the advertising industry where both local and international ad groups have merged or acquired smaller agencies. Industry experts believe that these trends will likely continue in India, especially as the ad industry faces pressure from reduced consumer demand and tight budgets.

 

“Advertising (industry) is facing a lot of pressure today. Ad revenues have come down significantly, no matter how large or small a company is. This is because there is no consumer offtake. Therefore, (advertising) budgets are being scratched tremendously... All this put together is a big challenge for advertisers today,” Chandramouli explains.