Publics Omnicom $35 bn Merger Creates Largest Advertising Company.
Financial advisers are in line to receive nearly $70m for their work on the $35 billion merger of Publicis and Omnicom, the third-biggest merger and acquisitions deal this year.
Unusually for a deal of its size, the companies negotiated much of the deal between the two chief executives and picked only one financial adviser each to structure the deal.
The strength of Omnicom, ranked second and whose customers include PepsiCo Inc. (PEP), Nissan Motor Co. (7201) and Royal Philips Electronics NV, lies in its U.S. business. Accounts that overlap include McDonald’s Corp. and Procter & Gamble Co. (PG)
Publicis, the third-largest advertising firm, brings a large portfolio of digital assets including Digitas, LBi International and Razorfish, a client roster including Bank of America Corp., Coca-Cola Co. and BMW AG, as well as agencies in emerging markets.
Moelis, adviser to Omnicom, and Rothschild, adviser to Publicis, will garner an estimated $25m-$35m each, according to data providers Thomson Reuters and Freeman Consulting.
While details on the actual fee payout is yet to be published, one person familiar with the terms said the estimates were in line with the true numbers.
In recent years, the average number of financial advisers on $10bn-plus deals has totalled about five. At extremes, the numbers are far higher, especially when complex or risky financing packages are required. In the still-contested buyout of computer maker Dell, there are 11 financial advisers working on the bid backed by its founder. The $10bn takeover of NYSE Euronext by Intercontinental employed 13 financial advisers.
The analysts at Thomson Reuters and Freeman Consulting said the fees were up to 30 per cent less than might be expected because of the small number of advisers.
“The reason we didn’t add more advisers is because we didn’t need them at the end of the day. Maurice and I settled many of the issues,” John Wren, Omnicom’s chief executive, told a press conference in Paris on Sunday. The bankers were tasked with creating the complex dual-listed structure central to making this a merger of equals.
Over the past decade, the trend has been for large investment banks that provide financing as well as advice to bulk up the number of advisers on deals. However this year, boutique advisers have played a bigger role in M&A deals, indicating a return to older practices of using only advisers that have long-term relationships with the companies involved, some bankers say.
On a global basis, the deal has pushed Moelis up a space in the M&A league tables to 11 by value of deals it has advised, ahead of Rothschild which moved up two spots to 13.
The Rothschild group has a close relationship with Publicis: Michel Cicurel, chairman of La Compagnie Financiere Edmond de Rothschild, is also on the French group’s own board.
Moelis & Co has a long-term relationship with Omnicom through its bankers which include media specialist Geoff Austin. It has had a profitable run in recent years.
This year, the bank founded by Ken Moelis, who also worked on the Omnicom Publicis merger, advised on deals including Life Technologies’ $15.7bn sale to Thermo Fisher Scientific, and an advisory role for Heinz’s transaction committee in its $28bn sale to Berkshire Hathaway and 3G Capital.
Other big deals this year were notable for their use of independent or specialised investment banks. Liontree, the boutique adviser founded by ex-UBS bankers, made its first appearance in the top 10 M&A global advisers league tables, having had roles on Liberty Media’s $25bn acquisition of Virgin Media and Michael Dell’s $20bn bid to take over the computer maker that bears his name.