Publicis-Omnicom merger faces UK tax residency problems
Among other regulatory obstacles standing in the way of the giant merger is difficulty in obtaining competition clearance from the Chinese authorities – a relatively common experience in recent times. However, if the current phase of the process does not gain approval by 16 June, the entire phase will have to be started again.
Omnicom’s update on the Publicis merger plan accompanied publication of its results for the first quarter of 2014. Commenting on the results, the marketing industry's financial newsletter Marketing Services Financial Intelligence said:
" Based on a superficial analysis Omnicom appears to be doing worse on its own than it might do within a merged Publicis Omnicom Group. As a result Omnicom appears to be negotiating from a relatively weak position.
"Admittedly Omnicom revenues grew by 3% in the first quarter whereas those of Publicis grew by only 2.2% (see Slowdown in Publicis revenue and Omnicom merger (http://www.fintellect.com/
"Omnicom’s poor revenue growth in Europe contrasted with a healthy performance at Publicis (although both companies lamented a disappointing performance in France). Conversely revenues in North America made more progress in Omnicom than in Publicis."
No figures are available for Publicis Groupe’s post-tax profit for the period, whereas Omnicom earned $205.5 million – up by just 0.2% on the first quarter of 2013. Omnicom pointed out that its profit had been depressed by $6.7 million spent on merger related costs in the quarter after deduction of tax relief. Omnicom also revealed that the group’s lowly operating profit margin was continuing – at 10.9% or 11.1% if the merger costs were excluded. However, that margin was a slight improvement on the previous year.
"Unless the group can take an axe to its staff related costs – they absorbed 74.9% of revenue in the first quarter - it seems hard to envisage much improvement in operating profit margin", the newsletter's editor Bob Willott said. "Doubtless Publicis is already focussing its attention on this statistic."