Omnicom Group Inc (NYSE:OMC) agreed Monday to acquire Interpublic Group of Companies, Inc (NYSE:IPG) in a stock-for-stock transaction.

Interpublic shareholders will receive 0.344 Omnicom shares for each share of Interpublic common stock.

Should the transaction close, Omnicom shareholders will own 60.6% of the combined company, and Interpublic shareholders will own 39.4%.

John Wren will remain chairman and CEO of Omnicom. Phil Angelastro will remain EVP and CFO of Omnicom. Philippe Krakowsky and Daryl Simm will serve as Co-Presidents and COOs of Omnicom.

Wall Street Journal was the first to report the deal.

Omnicom, the third-largest advertising company, bid $35 billion for Publicis Groupe SA (OTC:PGPEF) (OTC:PUBGY) in 2014. The deal never came to fruition.

According to COMvergence data, Omnicom secured $7.37 billion in client billings this year. That includes $4.4 million from retained accounts, surpassing its closest competitor by over 40%. Notably, Omnicom achieved the highest retention rate in the industry, keeping 85% of billings under review while adding new clients.

Rational

• The transaction should generate annual cost synergies of $750 million.
• The companies involved value the deal at around $13 billion. It could create the world's largest advertising company, surpassing WPP Plc (NYSE:WPP) in revenue.
• The combined entity's proforma 2023 revenue is around $25.6 billion, with adjusted EBITDA of $3.9 billion and free cash flow of $3.3 billion.
• A successful merger with Interpublic would mark Omnicom's largest deal to date. However, the transaction is expected to draw regulatory scrutiny due to its potential impact on ad-buying competition.

Both companies face increasing pressure from tech giants like Google and Meta, whose AI-driven advertising tools threaten to disrupt traditional agency revenue models.

Generative AI poses challenges for ad agencies by automating tasks historically performed by copywriters, designers, and ad buyers.

Citing Forrester Research, the WSJ report notes that automation could eliminate 33,000 ad agency jobs by 2030, accounting for nearly 8% of the workforce.

Interpublic has struggled in recent years, losing major accounts such as Amazon's ad-buying business. Under CEO Philippe Krakowsky, the company has been exploring strategic options, including restructuring efforts advised by McKinsey and the sale of underperforming assets.

• Last week, Interpublic sold the digital company Huge to AEA Investors, a private investment firm. Deal terms were not disclosed.
• Recently, Interpublic acquired Intelligence Node, an eCommerce intelligence platform, to enhance its commerce capabilities. The platform provides clients real-time product and market intelligence to understand shopper trends, drive sales growth, and optimize performance.

If the merger proceeds, it would reflect Omnicom's strategic pivot towards larger-scale consolidation after focusing on organic tech development and smaller acquisitions. The deal could provide a lifeline for Interpublic amid increasing competitive pressure and declining market share.

Price Action: IPG stock is up 13.5% at $33.23, and OMC stock is down 2.34% at $101 during the premarket session at last check Monday.

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