Sources say OMG agencies already lay claim to more than 50% of media spend in New Zealand; the new mega-merger will only reinforce that dominance.

“As a result, OMG will command significant buying power which may place pressure on both media owners, who will likely be pushed to deliver the best price and value to OMG clients, and independent agencies, who may struggle to compete with these pressures,” said one source.

“Managing conflict will be OMG’s main priority as clients may have concerns at how their businesses will be managed. At an initial glance, a newly consolidated OMG would have the three main telco clients (Spark, One NZ and 2degrees), almost all of the major banks and various other clashing clients.”

But while big might seem beautiful, there will be plenty of nervous staff in the various agencies.

“Behind the celebratory headlines and executive statements lies a stark reality for employees at Omnicom and IPG,” reported CEO Today. “The announcement’s promise of $750 million ($NZ1.3 billion) in cost synergies has sparked fears of widespread layoffs, particularly among overlapping functions and agencies.”

One advertising analyst told the website: “Consolidation is the name of the game right now. This merger sets a new benchmark and signals that scale is no longer optional in an industry dominated by big tech platforms like Google and Amazon.”

New Zealand sources believe it will still take some time for big changes, such as cutbacks, to filter to the local market. Even so, there would be broader market impacts.

“The concentration of market power is quite a significant issue,” said one source.

“You could ostensibly have DDB, FCB, Colenso and Clemenger all pitching for the same Government account, for instance. This might create the impression of different companies, but all essentially feed into the same mothership. From a procurement perspective, this could pose an interesting ethical dilemma for government departments.

“How comfortable should a government department feel knowing that all those businesses are owned by the same organisation?”

Client clashes and conflicts within agencies were also flagged as an industry concern.

“Ad agencies have always been pretty good at managing this,” said one source.

“It wasn’t that long ago that DDB had Westpac, Colenso BBDO had BNZ and TBWA had ANZ, despite all these agencies being owned by Omnicom. We’re going to see much more of that happening as even more brands are brought under the same umbrella. It now becomes a question of how comfortable clients feel about this – especially in the event that we do see some consolidation.”

How do independent NZ agencies feel?

Independent Media Agencies of New Zealand (IMANZ) general manager Kath Mitchell said her members were resilient, quoting latest industry data showing 49% had expanded in the past 12 months and a further 28% had been stable.

“However, we need to consider how far that resilience can stretch. Mergers like this mean we will see a concentration of greater market power in a single holding company. We should, at the very least, be having conversations about what impact that has.”

She said data also showed 45% of IMANZ members did not have a single government client.

“I would hope that the news of this merger helps to draw attention to how the industry is structured and how much power is concentrated in a small group of holding companies.

“My advice to those who work in government procurement is to look deeper at agency ownership and often they will find they feed into one of those holding companies sending their profits offshore.”

Commerce Commission’s position

A Commerce Commission spokeswoman said the organisation had not received any material at this stage about the proposed global transaction, “but we are aware of it”.

“We assess mergers using the substantial lessening of competition test. This test asks whether a merger is likely to substantially lessen competition by comparing the likely state of competition if the merger proceeds with the likely state of competition if the merger does not proceed.

“We will give clearance to a proposed merger if we are satisfied that the merger is unlikely to have the effect of substantially lessening competition in a New Zealand market.”

Omnicom chief executive John Wren said in a statement that the acquisition of Interpublic would “harness the significant opportunities created by new technologies in this era of exponential change.”

The deal is expected to be in place by the second half of next year.

It perhaps seems questionable whether New York executives will be too bothered about seeking permission in this part of the world.

The Commerce Commission spokeswoman acknowledged that filing for a merger clearance in New Zealand was voluntary.

“The commission cannot require parties to file for clearance,” she said.

“However, if parties do not file for clearance, and the commission forms the view that their transaction may have or may have had, the effect of substantially lessening competition, the commission can open an investigation into the transaction and ultimately take enforcement action which could result in significant penalties or a court reversing the transaction.”

Creative impacts

“It’s important to understand that the impact of this flows through to some of the best ad agency brands in this country,” says former NZ Herald advertising and marketing columnist Damien Venuto, now a senior account director at One Plus One.

“If you look at the likes of DDB, FCB, TBWA, Colenso BBDO and Clemenger, you’re talking about the companies that have given us some of the most loved ads in the history of New Zealand.

“Driving Dogs, the Lotto Pirate Ship, Togs-Undies and Ghost Chips are just some of the campaigns to have emerged from these brands. What you’re talking about here is talent and cultural history in our creative sector.”

The deal meant that all profits that flowed through these companies would ultimately end up in the newly merged US-listed entity.

“This, of course, isn’t new,” said Venuto.

“As long as there have been holding companies, advertising money spent in New Zealand has flowed through to those global juggernauts. The difference now is that we have one less holding company competing for a cut of an even more consolidated pie.

“I expect independent agencies, which New Zealand has in abundance, will look for ways to capitalise on this opportunity and play up their point of difference.”

Mitchell said: “While our independent media agencies cannot compete with the scale of global holding companies, we bring agility, adaptability and innovation to the table to create bespoke strategies for clients.

She said independent media agencies were able to implement innovative strategies that larger firms might be slower to adopt.

The independents could “push creative boundaries without corporate constraints”, she said.

Furthermore, independent media agencies were willing and prepared to collaborate with the global agencies when it made commercial sense for all parties involved, especially the client.

“When you invest in a local independent media agency, you know every cent of that is staying in New Zealand. IMANZ members processed an estimated $570 million in annual billings last year and employ over 760 employees across the country – there’s a great opportunity for local to support local.”

Meanwhile, Omnicom and some of their agency executives in this part of the world are not keen to comment at this stage.

“Unfortunately, we will not be able to provide any commentary at this moment. Thank you for your understanding,” said OMG APAC chief communications and talent experience officer Justin Low.

Editor-at-Large Shayne Currie is one of New Zealand’s most experienced senior journalists and media leaders. He has held executive and senior editorial roles at NZME including Managing Editor, NZ Herald Editor and Herald on Sunday Editor and has a small shareholding in NZME.