The $35bn mega-merger of Publicis and Omnicom is facing continued uncertainty. Omnicom chief executive John Wren said last week that he was unsure when the deal would complete due to its “complexity and open issues”.
There are three main issues that have yet to be ironed out by management of the new company, to be known as the Publicis Omnicom Group.
1. Tax status
On Tuesday Wren said that both firms had not yet received approval to base their tax residency in Britain, with their headquarters remaining in the Netherlands.
Reports over the weekend said that both HM Revenue & Customs would only look to sanction the move if the advertising group moved senior staff to London and that Dutch authorities were cooling to the idea of a company legally based in the Netherlands but not subject to its tax rules.
2. Falling synergy
Since July last year, when the merger was announced, the attractiveness of the deal has declined according to some analysts.
“Growth in the faster growing markets (which is where Publicis has an advantage over Omnicom) has slowed, and (conversely) the 'slower' growth markets of the US and the UK (where Omnicom is stronger) are now some of the fastest growing areas,” Liberum media analyst Ian Whittaker said today.
We see an increasing chance the deal does not get done: it appears, in particular, that Omnicom is getting cold feet.
3. Management decisions
Both firms are still wrestling with management decisions including who the finance chief of the merged group will be and which firm will be listed as the “accounting acquirer”, the buyer from an accounting standpoint, on official filings.