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The anatomy of agency mergers

The recent merger of Leo Burnett and Publicis Worldwide to form ‘Leo’ has re-sparked conversations that began in the aftermath of IPG-Omincom. As the advertising industry braces itself for 2025, experts explain the nitty-gritty of M&A and how networks manage the conflicts, turmoil, and confusions of the post-merger period.

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Harshal Thakur
New Update
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In the corridors of the advertising world, the latest buzzword isn't about a breakthrough campaign or a revolutionary AI tool. It's "Leo." This newly formed entity—born from the merger of Publicis Groupe’s iconic Leo Burnett and Publicis Worldwide—is making waves as much for its formation as for what it symbolises: a shift in the advertising landscape.

Arthur Sadoun, Publicis Groupe's CEO, heralded Leo as “HI meets AI”—a poetic alignment of human insight and artificial intelligence. The industry is watching closely as Leo strides forward with the dual promise of timeless creativity and cutting-edge technology. But while this high-profile merger captures headlines, it also raises questions. How do such consolidations reshape agencies? What happens to clients and creatives when giants join forces? And perhaps most critically, how does the industry grapple with conflicts of interest and cultural alignment in the wake of these changes?

This isn’t uncharted territory. WPP’s 2023 consolidation of Wunderman Thompson and VMLY&R to form VML mirrors Publicis’ recent moves. These mergers are part of a larger trend—industry titans racing to build leaner, more versatile teams while vying for advertisers' wallets against tech juggernauts.

However, beneath the sheen of corporate press releases lies a complex web of motivations, challenges, and outcomes. In the advertising world, where creativity is king and client relationships are currency, mergers can be as tricky as walking a tightrope blindfolded. But when done right, they can also be revolutionary, offering agencies and clients a toolkit of unparalleled capabilities.

The puzzle pieces of M&A

Every merger begins with a question: “Can we be greater than the sum of our parts?” As Rehan Dadachanji, Co-founder of The Starter Labs, puts it, “A typical merger or acquisition is like solving a massive puzzle.” Whether driven by the need for operational efficiencies or geographic expansion, the motivations are as varied as the entities themselves.

For advertising networks, M&A often revolve around synergies that enhance service capabilities. Danish Malik, Co-Founder and CEO of Boomlet Group emphasises that these decisions are fueled by the pursuit of niche expertise, market reach, or operational efficiency. He explains, “Mergers often start with identifying synergies, followed by due diligence, negotiations, and integration planning.”

For instance, when Publicis formed Leo, it wasn’t just about efficiency; it was touted to be a strategic effort to counter the looming dominance of big tech. As Sadoun put it, the goal was to bring "human vision" to the forefront of AI-driven ad solutions.

On the flip side, mergers can also stem from a need to de-risk. Rohan Bhansali, Executive chairman and Co-founder of Gozoop Group points out that selling to a network is often a hedge against future uncertainty. However, he warns of a hidden trap: “Agencies selling for valuation alone often end up prioritising short-term gains over long-term brand-building.” 

Mergers like Publicis' creation of Leo or WPP’s formation of VML underscore a growing need for agencies to consolidate creative, technological, and data-driven capabilities. Anand Bhadkamkar, CFO & COO of LS Digital, stresses that advertising remains a "people business" despite advancements in AI. “Mergers should prioritise alignment of creative cultures alongside operational efficiencies," he advises.

Global agencies often acquire smaller firms to expand their geographic footprint. Malik notes that acquisitions in emerging markets like India or Southeast Asia are often driven by the need to cater to local nuances. “An agency that understands cultural contexts can craft campaigns that resonate deeply,” he explains.

Managing clients post-merger 

Client management in the aftermath of a merger is a delicate dance, balancing continuity with the need to showcase new capabilities. The stakes are high, as disruption can lead to client churn—a risk that networks cannot afford in an already fragmented industry.

The approach to client redistribution varies widely. Some networks adopt a centralised strategy, while others lean on individual agency expertise. Dadachanji explains, “Post-merger, clients are distributed based on who can deliver the best results, often aligning with an agency’s unique strengths.” Malik adds, “It’s not a one-size-fits-all approach. Some clients value continuity, while others want to leverage the broader capabilities of the merged entity.”

For clients, mergers can feel like being caught in a riptide. Clear communication becomes critical. Malik highlights the importance of sharing detailed action plans, while Dadachanji emphasises continuity, noting that retaining the same account managers can make a significant difference. “Go the extra mile,” he advises, “to ensure clients feel valued and supported throughout the transition.”

Bhansali recalls a scenario where Gozoop acquired a competing agency and had to manage conflicting brand clients. “We sat down with both parties and outlined our ethical protocols,” he shares. “The key was transparency and creating comfort zones for both clients.”

Conflicts of interest—like managing competing brands within the same category—add another layer of complexity. Malik explains how networks implement "firewalls" to maintain confidentiality. Bhadkamkar stresses, “Adhering to ethical standards isn’t just good business; it’s essential for trust. In some cases, you may need to part ways with a client to uphold those standards.”

Legacies and lessons

Mergers are not without their pitfalls. While the promise of enhanced capabilities and expanded market presence is enticing, the long-term impacts hinge on execution.

Successful mergers can bolster a network’s reputation. Dadachanji likens it to upgrading from a Swiss knife to a full toolkit, offering clients a broader range of services. “The ability to offer a full suite of capabilities is a compelling value proposition,” he notes. 

However, Bhansali cautions against losing sight of an agency’s essence, citing the fate of Indian stalwarts like Taproot as a cautionary tale. “I think these mergers often have a negative impact on the industry as a whole. The entrepreneur's focus shifts to valuation and exit, prioritising short-term gains over long-term brand-building. This narrow focus on margins and short-term goals ultimately harms the agency. Over time, agencies lose their essence and fail to sustain their legacy. The long-term impact on mergers becomes negative as they kill agencies such as Taproot, a name I’ve historically looked up to, and we all know where that stands today.” he shares. 

Bhansali remarks, “It’s unfortunate that 80% of Indian brands’ advertising is controlled by global networks. This dominance of networks is detrimental to Indian advertising and needs to change.” 

Bhadkamkar underscores the importance of cultural alignment in ensuring a merger’s success. “Poorly managed integrations can lead to discontent and reputational damage," he warns. "But those prioritising strategic objectives and clear narratives can establish a competitive edge.”

The consolidation trend reflects an industry-wide response to the growing dominance of tech companies in advertising. With pureplay digital advertising projected to account for nearly 77% of total ad spend by 2029, traditional agencies must adapt or risk obsolescence. Mergers like Leo and VML signal a concerted effort to strengthen capabilities.

Dadachanji believes this is the future: “Agencies must evolve from creators of campaigns to orchestrators of ecosystems. Mergers are a step in that direction.”

Mergers and acquisitions in advertising are more than just boardroom deals; they’re a high-stakes game of chess with the industry’s future at stake. Success lies in blending humanity with innovation, all while navigating the choppy waters of client relations and cultural integration.

For agencies contemplating a merger, the lessons are clear: focus on synergies, prioritise client trust, and never lose sight of the creative soul that defines advertising. After all, the true magic of this industry lies not in numbers or algorithms but in its ability to connect, persuade, and inspire—a human endeavour amplified, not replaced, by AI.

Leo Burnett publicis mergers and acquisitions ad networks Conflict of interest