Clients Take Agency Mergers In Stride:“It's The People Who Make The Difference”

• “The holding company model has been broken for years, so this kind of consolidation feels overdue.”-Charlotte West, Lenovo
• “The pressures on the holding companies are immense, and unfortunately the PR agencies are suffering due to major disruption to the advertising business.”-UK-based CCO

On scale vs specialization:

• “Clients increasingly require partners who can match the full complexity of their global needs-or, alternatively, firms with world-class expertise in a defined space.”-Andy Pharoah, Mars
• “Size alone isn't the differentiator. It only matters if it improves clarity, speed, and impact for clients.”-Jon Harris, Conagra Brands
• “No matter what the model, the magic is in smart and seamless integration that ensures you continue to listen to clients and anticipate needs.”-Russell Dyer, Kemvue

On the value of agency brands:

• “They might as well be called Omnicom I, Omnicom II and Omnicom III.”-Senior communicator, based in Europe
• “In the end, these days brands are about attraction and retention of talent for clients.”-Brian Lott, Mubadala

On why people are the key:

• “At the end of the day, it's the people in the room who make the difference.”-Kell McGinnis, Levi Strauss
• “Some of the best people are also the most expensive, and they can be among the first to depart after this kind of disruption.”-European CCO
  
  

The world's largest corporate communications clients are neither shocked nor particularly troubled by the latest consolidation in the public relations agency business: the news this week that Omnicom would be combining four of its global public relations brands, merging Ketchum into Golin and placing Porter Novelli under FleishmanHillard.

The Omnicom consolidation came two years (almost to the day) after WPP announced that it was merging its BCW-itself an amalgam of Burson-Marsteller and Cohn & Wolfe-and Hill & Knowlton brands to create Burson, so that there are now three fewer genuinely full-service PR agencies competing for global business than there were at the start of 2024.

We canvassed more than a dozen corporate communications leaders around the world and heard that the majority saw these changes as an inevitable-and perhaps overdue-consequence of the holding company model, and an understandable response to changes in the broader media and communications landscape.

But we also heard that clients do not necessarily believe that“bigger is better.” Many expressed at least equal enthusiasm for working with locally-based or specialist firms if they can deliver the necessary expertise. Some also expressed concerns about the lack of differentiation among the remaining global players.

And if there was one over-riding consensus, it was that-as has always been the case-people, and the expertise they bring, are more important than agency structures, business models or even scale.

A Natural Consequence of the Holding Company Model

In general, the CCOs with whom we spoke view the consolidation of the global agency market with equanimity.

“To me, this feels like a natural evolution of the agency model in response to disruption across media, technology, and stakeholder expectations,” says Andy Pharoah, vice president of corporate affairs and sustainability at Mars.

Several others noted that adjacent sectors, including advertising and most particularly legacy media had experienced greater consolidation-and far greater disruption-in recent years.

“From where I sit, consolidation feels less like disruption and more like the ongoing reshaping of the agency landscape,” says Kelly McGinnis, chief communications officer at Levi Strauss & Co., whose agency Burson went through a similar consolidation two years ago.“We haven't seen the previous shifts affect our partnerships.

“What ultimately matters to us as clients hasn't changed. We care about the caliber of talent, the strength of the culture, and smart, strategic work that drives real results.”

Charlotte West, vice president of global corporate communications at Lenovo, goes further:“The holding company model has been broken for years, so this kind of consolidation feels overdue. In many ways, it's a correction that's been a long time coming.

“One of the long-standing challenges with holding groups has been their inability to truly build blended teams around client needs, regardless of internal P&Ls. In theory, merging agencies may help address some of those structural barriers, but culture doesn't change overnight. Leadership dynamics and ways of working will take time to settle.”

But she warns:“There is also a potential downside for clients in terms of choice. As agencies merge, conflicts become more likely, particularly for large, diversified brands operating across multiple categories.”

What concern there was about the impact of consolidation was driven by a suspicion that the holding companies might be side-effects of what is happening in the advertising arena, rather than strategic decisions about what us best for the PR agencies themselves.

One UK based communications executive, himself a veteran of the global agency business, suggested:“The pressures on the holding companies are immense, and unfortunately the PR agencies are suffering due to major disruption to the advertising business-paying a price for a problem that's not theirs.

“While consolidation is a natural consequence, agencies need to be careful what they signal. Clients and Wall Street are not aligned. Client focus and service and cost savings are two different things. If the message is muddled, clients will get nervous.”

Nevertheless, clients clearly see consolidation as a phenomenon that is unlikely to end with the current mergers. Says Jon Harris, chief communications & networking officer at Conagra Brands:“Consolidation isn't new, and it doesn't automatically mean fewer choices for clients. What it really does is clarify the landscape: a smaller number of global agencies alongside a growing universe of highly specialized, best-in-class firms.”

Scale Matters, But Midsize Firms Still Have a Role

“We work with global agencies, but not necessarily on global assignments,” says the CCO of on large US based healthcare client.“In fact, I question how many genuinely global assignments there really are. We typically have a horses-for-courses approach, which means selecting the right agency for the right project in the right market. That might be one of the big holding company agencies, but more often it's a local firm or a specialist firm attuned to the local market.”

The same client suggests that the more mission- critical an assignment is, the more likely he is to select a more specialized firm.“Quality and fit are more important to me than the convenience of a global relationship.”

Nevertheless, most of those we spoke with acknowledged the value of scale-if the agencies involved can efficiently harness the resources at their disposal.

Says Pharoah,“Clients increasingly require partners who can match the full complexity of their global needs-or, alternatively, firms with world-class expertise in a defined space. The middle ground is becoming harder to sustain. The question isn't whether agency brands matter, but whether the merged organizations can deliver distinctive value in a more demanding and more integrated communications landscape.

“But in the end success is about people, capabilities, results and the ability to provide seamless support.”

Others noted that the large holding companies agencies have often failed to deliver the benefits of scale because of internal obstacles, including the proliferation of separate P&Ls that can inhibit the sharing of resources between practices and geographies, often preventing clients from accessing the best talent from throughout the organization.

As West explains,“The real gap from large global networks for me has been around orchestration and connecting the dots with outside expertise. Mid-sized agencies often excel in their ability to curate the right combination of capabilities both internally and externally for the good of the client, rather than for the good of their 'we can do it all' bottom line.”

Jon Harris agrees.“Scale can be valuable if it delivers better global coordination, shared insight, and consistency across markets,” he says.“But size alone isn't the differentiator. It only matters if it improves clarity, speed, and impact for clients.

“The best-in-breed local and specialist agencies will remain critical, particularly for cultural fluency, creativity, and speed. In my opinion, the most effective model is a blended one, with global networks and specialist partners each playing defined roles.”

For West, the bottom line is that clients will find uses for both giant global agencies and midsize firms:“Large global agencies still play a role to play at a strategic and reputational level and bringing a global mindset, but for local execution, best-of-breed agencies are more cost effective, more agile, and more determined, especially when teams are accountable for winning and retaining the business, not simply servicing work allocated by headquarters.

“The industry cycles between centralized and localized models, but my long-held view having worked both agency side and client side is that a fully centralized 'one-agency' model is only ever as strong as its weakest link (market). It can deliver efficiency in the short term, but it rarely holds up over the long term.”

Others see a continuing-and perhaps expanding--role for specialist boutiques with deep local expertise.

“Generally, I believe that the best-of-breed agencies have the advantage and that the big agencies have focused too much on selling and not enough on selecting and cultivating the best teams and expertise,” says one New York-based communications executive.“I have repeatedly selected best-of-breed with some exceptions.”

But the bottom line is that the market will always have room for both global scale and local focus.

“Call me Switzerland,” says Russell Dyer, chief corporate affairs officer at Kenvue.“I believe in the strength of big, global agencies offering integrated services and I believe in small, scrappy, independent agencies who obsess over clients and punch above their weight. I don't think big mergers automatically create or destroy value.

“No matter what the model, the magic is in smart and seamless integration that ensures you continue to listen to clients, anticipate needs and retain and deploy the best talent to drive innovation and impact.”

Do Agency Brands Even Matter Any More?

One area where clients differ involves the relevance of agency brands as the market continues to evolve. As once-admired agency names fade from view, there appears to be less obvious distinction between those that remain.

“From a client perspective, agency brand names matter far less than they used to,” says West.“What clients care about is the work and the talent doing that work-and that talent is increasingly fluid. The prestige of having a 'big name' agency on your roster has largely disappeared.”

Some clients clearly feel that the largest of the global agencies are losing their distinct identities.“With the exception of the specialist firms like FGS and Brunswick, and maybe Edelman because it's independent, they all have the same business model, the same culture, the same services,” says the chief communications officer of a European consumer brands company.“They all use the same AI tools.”

The latter concern was interesting, with several of those with whom we spoke suggesting that AI-far from being a differentiating factor-would make all of the giant holding company agencies more similar.“I see it already in the work product,” says one.“It's becoming more generic.”

Another sees distinctions at the margins.“Some may be better at heathcare, or better at public affairs in a particular market. Some may be stronger in Asia or Latin America. But for the most part they are interchangeable.” Speaking of the newly-merged OPRG agencies, he added:“They might as well be called Omnicom I, Omnicom II and Omnicom III.”

That's cause for regret for some.

“I came from Burson and we invested a lot of time and effort internally into what it all meant,” says Brian Lott, who now serves as chief communications officer at Dubai-based Mubadala, who warns that agencies should not lose sight of the power of their brands to attract good people.

Says Lott,“In the end, these days brands are about attraction and retention of talent for clients-and mergers have to prove the value their combination offers to clients by who they can keep. I think it's that simple.”

And that, for many clients, is the most important question is all of thisL what does it mean for the people.

The Bottom Line is People

“At the end of the day, it's the people in the room who make the difference,” says McGinnis.“Whether they are from a big global firm or boutique, the right agency team is the one that understands our company, challenges us when we need it, and consistently delivers.”

Harris agrees:“Ultimately, clients care far more about outcomes than structure. And it really comes down to the team working on your business. Senior talent, team stability, and the ability to integrate and challenge us matter more than logos.”

That suggests that the mergers and consolidation we see need to be accomplished with minimum disruption to client teams-a tall order if cost savings are the focus-and with maximum stability.

And some clients clearly remember the fallout from previous consolidations, which saw waves of senior talent exiting the merged agencies, often because of the“two into one won't go” issue: that the combined agencies have two heads of every practice, every sector, and every geography-and that almost inevitably one of those individuals will leave.

Says the European consumer products CCO:“I question the ability of these agencies to retain their top talent. In fact, I question whether getting rid of top talent isn't, in some ways, the objective. Some of the best people are also the most expensive, and they can be among the first to depart after this kind of disruption.”

If consolidation is designed to provide clients with access to a broader range of senior talent and specific expertise, clients are likely to reap the benefits. If they are driven more by a focus on cost-cutting and restructuring, it's hard to see what's in it for those who pay the bills.

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