• by Steve McClellan  @mp_mcclellan, July 29, 2013

Betrothed CEOs John Wren of Omnicom Group and Maurice Levy of Publicis Groupe continued to talk up their proposed merger today in several calls with analysts and investors.

And while they repeatedly said the merger would be in the best interests of clients and employees, there are likely to be fewer of both at the merged entity-- Publicis Omnicom Group (POG)--if the merger goes ahead as planned later this year or next.

Analysts pounded away at the client conflict issue. While the executives didn’t mention clients by name, two of the more obvious conflicts are Coca-Cola, for which Publicis does work on both the creative and media side and Omnicom client PepsiCo. There’s also MillerCoors at Publicis and Anheuser-Busch at Omnicom.

One analyst suggested that conflicts could cost the merged company up to 10% of its business due to clients leaving to avoid conflicts. Both Wren and Levy strongly disagreed that the loss of business would be anything close to that.

“It’ll be closer to 1%,” Wren countered, and which he insisted would not be material to financial results. Levy added that “I am absolutely certain there will be very little revenue lost and a lot of revenue gained.”

Both CEOs said they had talked to major clients before going public with the deal and that feedback was positive. While that doesn’t mean that upon reflection some clients won’t have concerns, Wren said that “we’ll sit down with those clients and come up with creative solutions.”

Conflicts are hardly new, Wren noted. In today’s already heavily consolidated agency landscape, he added, "I think most clients have moved past this as an issue.” And unless they are unsatisfied with the work, big clients aren’t going to go through the disruptive process of a major review because of a holding company merger, he asserted.

“We have extremely strong firewalls already in place,” added Levy. 

The company told investors it expects to achieve annualized savings of $500 million. It may take five years to get to that point, said Omnicom CFO Randall Weisenburger, who also noted it would take added investment of around $400 million to achieve those savings on an ongoing basis.

The merged company would have 130,000 employees. There are redundancies that will be examined. A small cut, said Weisenburger, can yield a “big improvement” on the cost side. The companies spend more than $1 billion on office supplies alone and $15 billion on “salary and service costs.”

Procurement teams will address many of those costs, such as contracts for third-party research and other vendors.

The companies will also go through their rosters to consider divestitures of holdings not deemed strategic for the future. Those sales, of course, should they occur, would not happen before the merger is completed.

There’s been speculation that the companies would combine their buying operations if the deal goes through, like WPP’s GroupM has done to maximize buying clout. The top buyers at GroupM’s agencies all report to Rino Scanzoni, the firm’s Chief Investment Officer and they go to market as one operation.

On that subject Wren stopped short of confirming that POG would adopt the GroupM model. But clearly that strategy will be up for consideration. “We’re not rushing to say we are going to do anything before we sit down and discuss in detail,” the options, he said.

As for the estimated 40% or so of agency billings attributed to the combined entity by billings tracker RECMA, which could raise concerns for regulators, Levy stressed that such estimates are “an indication [directionally] but not representative of the reality.” Those figures are “always a little inflated.” That said, RECMA gets its data directly from the agencies it reports numbers for.