Maurice Levy’s romance didn’t last long.
Just four months after the chief executive officer of Publicis SA (PUB) agreed to a $35 billion merger with Omnicom Group Inc. (OMC:US) last July, doubts started creeping into his mind, with disputes over who would fill key management roles and the new company’s structure driving a wedge between the 72-year-old Frenchman and John Wren, his counterpart at Omnicom, according to people familiar with the matter. The two sides called it quits this week, with Levy likening the move to a breakup that’s preferable to a messy divorce.
Levy’s concerns underpinned a broader dispute that played a bigger role in stopping the deal than regulatory delays cited by the companies, the people said, asking not to be identified because the deliberations were private. To correct what he felt was an imbalance, Levy sought to install Publicis Chief Financial Officer Jean-Michel Etienne in the same position at the new company, and to ensure another Publicis executive would take on the role of treasurer, the people said.
Also on Levy’s mind was that Publicis, a giant of corporate France, would become largely an Anglo-American company, with key managers and its primary listing in New York.
Levy and Wren had hugged and popped champagne at a July 28 press conference on the roof of Publicis’s Paris headquarters overlooking the Arc de Triomphe, before flying across the Atlantic to celebrate the partnership on the floor of the New York Stock Exchange.
“We agreed we have balance in the management team and I have not been able to convince John that balance means balance,” Levy said yesterday during a two-hour conference call following the announcement of the split. “It’s disappointing we had this dream which is not going through, but it’s better not to go to the church rather than going to the judge. We are divorcing before getting married.”
Levy said the deal fell apart because it felt more like a takeover by Omnicom than what was billed as a merger of equals. While he and Wren, 61, agreed to jointly lead the new company for 30 months, Levy said he had planned to stay on for only two years and then hand it over to Wren. In return, Publicis should have the right to name the CFO, he said.
On a separate conference call, Wren said the deal ultimately failed because a combination they estimated would take six months turned into a process with no end in sight.
“We underestimated the cultural differences and if I had the answer I would have brought it up,” Wren said, without discussing specific management disagreements.
Representatives for Paris-based Publicis and New York-based Omnicom didn’t return phone calls seeking comment beyond what their CEOs discussed during the conference calls.
The two men’s union seemed unlikely from the start. Levy is a garrulous celebrity CEO who’s a regular presence on television and at media conferences; an American journalist once vividly described his instructing her in the art of hand-kissing. Wren, by contrast, is more reserved, and rarely granted interviews before the Publicis deal was announced.
The all-stock transaction would have toppled market leader WPP Plc by creating a company with $23 billion in revenue. It would also have brought under one roof agencies including Omnicom’s BBDO Worldwide and Publicis’s Leo Burnett and Saatchi & Saatchi, and give the owners more clout to negotiate for their clients better ad rates for media placements on television, the Internet and in print.
Omnicom and Publicis cited a complicated corporate structure as the reason for delays in closing the deal -- the new company was to be domiciled in the Netherlands, pay tax in London, and have key executives in Paris and New York.
However, those issues would probably have been surmountable with enough time and determination, and were exacerbated by behind-the-scenes squabbles that slowed down regulatory processes, the people said.
Other disagreements emerged over the chief operating officer and general counsel positions, the people said. Wren and Levy also didn’t see eye to eye on how to organize the new company, they said. Omnicom is highly de-centralized, with agencies having significant autonomy, while Publicis is top-down, and finding a compromise between the management styles proved difficult, they said.
Levy kept up a brave face in public until very recently, saying in an April 17 interview with Bloomberg Television he was confident the companies would win antitrust approvals to complete the merger. Levy, whose CEO mandate runs through 2015, said yesterday he would lay out succession planning by September.
Wren was more cautious, having been advised by his lawyers to flag the uncertainty during an April 22 conference call for Omnicom’s financial results, said one of the people.
Wren’s comments set off the last debate between the two companies about whether the deal was feasible, with a final decision to part ways made by both boards this week.
“It will be a very long time before I try to do a merger of equals again,” Wren said.
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