WEBVTT 1 00:00:08.105 --> 00:00:10.775 Hello and welcome to this Vidcast, which is devoted 2 00:00:10.835 --> 00:00:13.655 to two major companies communication 3 00:00:13.995 --> 00:00:15.655 and advertising agendas. 4 00:00:16.235 --> 00:00:19.695 The first one created sync different for Apple. 5 00:00:20.395 --> 00:00:23.255 The second one is attributed the L'Oreal famous 6 00:00:23.525 --> 00:00:24.935 because you are worth it. 7 00:00:26.395 --> 00:00:28.495 You probably recognized Omnicom 8 00:00:28.755 --> 00:00:31.455 and Interpublic group respectively. 9 00:00:31.455 --> 00:00:33.655 Number three and number four in the industry. 10 00:00:34.395 --> 00:00:38.615 On the 9th of December, 2024, the companies announced 11 00:00:38.655 --> 00:00:41.975 that they were combining their business operations into one 12 00:00:42.155 --> 00:00:43.175 unique entity. 13 00:00:44.715 --> 00:00:47.215 The combination will take the form of an acquisition. 14 00:00:47.845 --> 00:00:49.655 It's not going to be a cash acquisition, 15 00:00:49.675 --> 00:00:51.175 but an all stock transaction. 16 00:00:52.005 --> 00:00:55.335 Omnicom is going to buy IPG, each 17 00:00:55.355 --> 00:00:57.695 and every shareholder of IPG is going 18 00:00:57.695 --> 00:01:02.455 to receive 0.344 newly created Omnicom 19 00:01:02.455 --> 00:01:04.775 shares for each and every IPG share. 20 00:01:05.595 --> 00:01:07.015 If you take the stock price 21 00:01:07.355 --> 00:01:09.775 of Omnicom when the transaction is announced, 22 00:01:09.795 --> 00:01:13.015 it represents an enterprise value for Interpublic 23 00:01:13.015 --> 00:01:15.055 of $13.2 billion. 24 00:01:15.645 --> 00:01:18.855 Unfortunately, from the moment they made the announcements 25 00:01:18.955 --> 00:01:21.935 to today, the stock price dramatically dropped 26 00:01:22.235 --> 00:01:25.895 and the enterprise value today is about $12 billion. 27 00:01:26.915 --> 00:01:30.535 Now of course, as you create Omnicom shares, which are going 28 00:01:30.535 --> 00:01:33.415 to be given to IPG shareholders, 29 00:01:34.115 --> 00:01:35.815 the Omnicom shareholders are going 30 00:01:35.815 --> 00:01:38.575 to be diluted at the end of the transaction. 31 00:01:38.635 --> 00:01:41.735 The Omnicom initial shareholders will keep 32 00:01:42.065 --> 00:01:45.575 60.6% of the total number of shares. 33 00:01:45.995 --> 00:01:50.135 The IPG shareholders will receive 39.4% 34 00:01:50.275 --> 00:01:52.335 of the combined operations. 35 00:01:52.875 --> 00:01:55.535 Now, the objective is to create the number one global 36 00:01:56.075 --> 00:01:58.815 number three plus number four becomes number one 37 00:01:59.045 --> 00:02:02.215 with 100,000 employees end 38 00:02:02.235 --> 00:02:05.895 to end global service innovation for the customers 39 00:02:06.195 --> 00:02:07.855 and free cash flow for the investors. 40 00:02:09.555 --> 00:02:13.175 The initiator and the main conductor of this operation 41 00:02:13.235 --> 00:02:16.855 of this combination is John Rain, the CEO of Omnicom. 42 00:02:17.395 --> 00:02:19.255 He was born in 1952 43 00:02:19.675 --> 00:02:22.735 and interviewed by a journalist in 2024. 44 00:02:23.245 --> 00:02:26.815 When he is 72 years old, he says, I'm not 30 anymore. 45 00:02:27.475 --> 00:02:29.695 If I'm going to change the world, I'm going 46 00:02:29.695 --> 00:02:31.215 to change it quickly. 47 00:02:31.965 --> 00:02:34.735 This is a quite interesting statement, which puts uh, 48 00:02:34.735 --> 00:02:37.215 this combination into an interesting perspective. 49 00:02:38.995 --> 00:02:41.655 Now of course, combining these operations will create a 50 00:02:41.725 --> 00:02:42.775 very big company. 51 00:02:43.515 --> 00:02:48.295 If you use the 2023 figures, it's about $25.6 billion 52 00:02:48.315 --> 00:02:49.375 of combined revenue. 53 00:02:50.365 --> 00:02:53.055 Operating profits going to be close to 4 billion 54 00:02:53.755 --> 00:02:56.815 and the net income is going to be $2.7 billion, 55 00:02:57.105 --> 00:02:59.525 which is your ability to distribute a dividend. 56 00:02:59.865 --> 00:03:02.165 But it's just the ability to distribute a dividend. 57 00:03:02.165 --> 00:03:05.165 You need cash and the combined free cash flow is supposed 58 00:03:05.165 --> 00:03:07.525 to be more than $3 billion. 59 00:03:08.065 --> 00:03:11.245 So the company can definitely pay 60 00:03:11.245 --> 00:03:12.485 a dividend to its shareholders. 61 00:03:13.265 --> 00:03:17.245 The company will be predominantly based in us. 62 00:03:17.655 --> 00:03:21.565 57% of the revenues are going to be US revenues 63 00:03:21.565 --> 00:03:24.205 and 43% international revenues. 64 00:03:24.625 --> 00:03:26.805 But the dominant market in the world as far 65 00:03:26.805 --> 00:03:29.165 as advertising is concerned is us. 66 00:03:29.225 --> 00:03:31.365 So there's no very big issue around that, 67 00:03:31.905 --> 00:03:34.245 and the purchasing power will be very strong 68 00:03:34.245 --> 00:03:37.405 because global media billings will represent 69 00:03:37.575 --> 00:03:39.525 $65 billion. 70 00:03:41.025 --> 00:03:45.285 Of course, the equation is when you generate $3.3 billion 71 00:03:45.425 --> 00:03:48.245 of free cash flow, what are you going to do with the money? 72 00:03:48.865 --> 00:03:51.765 And Omnicom declares that the discipline in capital 73 00:03:52.325 --> 00:03:53.525 allocation will remain the same. 74 00:03:53.945 --> 00:03:58.165 We are going to keep on distributing a dividend $0.70 per 75 00:03:58.165 --> 00:03:59.685 share, no change. 76 00:03:59.985 --> 00:04:02.485 We are going to return capital to shareholders 77 00:04:02.485 --> 00:04:05.365 through buybacks share repurchases, 78 00:04:06.145 --> 00:04:10.085 and in between the company's mentioning acquisitions, 79 00:04:10.605 --> 00:04:14.645 targeted strategic acquisitions in high growth areas. 80 00:04:15.505 --> 00:04:16.725 That's quite interesting 81 00:04:16.725 --> 00:04:19.965 because they not mention growth very often in this 82 00:04:20.245 --> 00:04:22.885 communication, never about organ growth. 83 00:04:23.365 --> 00:04:27.365 A little bit about external growth, strategic acquisitions 84 00:04:29.105 --> 00:04:33.445 in its financial communication devoted to the announcement. 85 00:04:33.915 --> 00:04:37.605 Omnicom is again communicating on the transaction 86 00:04:37.605 --> 00:04:42.485 highlights, repeating the 0.344 new Omnicom shares 87 00:04:43.145 --> 00:04:46.765 the shareholders 60.6, 39.4, 88 00:04:47.505 --> 00:04:51.365 the plus more than $3 billion in 89 00:04:51.365 --> 00:04:52.565 annual free cash flow. 90 00:04:53.185 --> 00:04:55.965 The company's just mentioning that there will be 91 00:04:56.565 --> 00:04:59.245 expanded offerings creating greater 92 00:04:59.395 --> 00:05:01.005 opportunities for growth. 93 00:05:01.355 --> 00:05:03.325 Without giving a figure on that, 94 00:05:03.905 --> 00:05:05.765 the only additional figure which is 95 00:05:06.325 --> 00:05:09.405 provided by the communication is costs synergies, 96 00:05:09.465 --> 00:05:13.805 annual cost synergies of $750 million. 97 00:05:14.025 --> 00:05:18.285 So you understand that growth is mentioned and no target. 98 00:05:19.995 --> 00:05:21.565 It's quite interesting also 99 00:05:21.625 --> 00:05:24.005 to spend a moment discussing the financial structure 100 00:05:24.005 --> 00:05:28.005 of Omnicom IPG and the operations. 101 00:05:28.825 --> 00:05:30.245 In the financial communication. 102 00:05:30.595 --> 00:05:34.205 Omnicom says, oh, we have a leverage of 2.5. 103 00:05:34.275 --> 00:05:38.605 What does it mean? It means that debt divided by A BDA 104 00:05:39.365 --> 00:05:40.725 represents 2.5 years. 105 00:05:40.865 --> 00:05:43.485 It takes 2.5 years to repair the debt. 106 00:05:44.305 --> 00:05:46.085 As far as in Interpublic is concerned, 107 00:05:46.325 --> 00:05:49.765 the same figure is 1.7, so 2.5, 1.7. 108 00:05:50.225 --> 00:05:52.125 At first sight, it looks quite the same, 109 00:05:52.865 --> 00:05:56.405 but in fact they use debt divided by EBITDA 110 00:05:56.625 --> 00:05:59.725 and not net debt divided by ebitda. 111 00:06:00.145 --> 00:06:04.245 And as Interpublic is quite cash rich, the leverage 112 00:06:04.305 --> 00:06:05.805 for Interpublic is 113 00:06:06.475 --> 00:06:10.325 0.8 when it is 1.4 for Omnicom. 114 00:06:10.665 --> 00:06:14.525 So Omnicom is significantly more indebted than 115 00:06:15.115 --> 00:06:20.045 Interpublic and we can make the same comment on the debt 116 00:06:20.565 --> 00:06:21.605 maturity profile. 117 00:06:22.465 --> 00:06:27.245 In 26 27 combined, Omnicom will have to cash out $2 billion 118 00:06:27.385 --> 00:06:28.605 to repair the debt. 119 00:06:28.995 --> 00:06:31.205 Nothing for I-P-G-I-P-G is going 120 00:06:31.205 --> 00:06:35.285 to start redeeming the debt at the level of $500 million 121 00:06:35.385 --> 00:06:39.805 or one third of the cash they have in hand today in 2028, 122 00:06:40.265 --> 00:06:43.845 though definitely Interpublic is low leverage 123 00:06:44.505 --> 00:06:48.565 and debt is high maturity, so the company is much safer 124 00:06:48.785 --> 00:06:50.565 as far as the financial structure is concerned, 125 00:06:50.865 --> 00:06:53.765 and this is probably the reason why Omnicom 126 00:06:54.185 --> 00:06:57.445 and IPG decided for a shared transaction 127 00:06:57.505 --> 00:06:58.805 and not a cash transaction. 128 00:06:59.025 --> 00:07:02.565 The balance sheet of Omnicom would not have been strong 129 00:07:02.565 --> 00:07:05.765 enough to support this kind of acquisition in cash, 130 00:07:06.335 --> 00:07:09.445 which is definitely not a surprise when two big players 131 00:07:09.585 --> 00:07:13.285 of roughly the same size are combining their operations. 132 00:07:13.595 --> 00:07:15.085 It's very rarely in cash. 133 00:07:15.155 --> 00:07:17.565 General speaking, it's an all stock transaction. 134 00:07:19.385 --> 00:07:22.885 Now, I mentioned enterprise value and I mentioned growth. 135 00:07:23.415 --> 00:07:26.845 Let's make the valuation of IPG using the traditional 136 00:07:27.685 --> 00:07:30.125 DCF discounted cash flow method. 137 00:07:30.745 --> 00:07:32.805 So we are going to evaluate free cash flows 138 00:07:33.025 --> 00:07:35.005 and we are going to discount them at the weighted 139 00:07:35.005 --> 00:07:36.125 average cost of capital. 140 00:07:37.025 --> 00:07:40.245 In the free cash flow you have ebit, EBITDA taxes, 141 00:07:40.605 --> 00:07:44.485 depreciation, CapEx, and working capital requirement. 142 00:07:45.265 --> 00:07:48.765 As far as CapEx and DA is concerned, it's quite low 143 00:07:48.765 --> 00:07:50.165 because this is a service company. 144 00:07:51.095 --> 00:07:54.605 CapEx represent roughly 1.5% of revenues 145 00:07:55.145 --> 00:07:57.405 and is matching with DNA 146 00:07:57.405 --> 00:08:00.965 because the business is quite at maturity as far 147 00:08:00.965 --> 00:08:03.525 as the working capital requirement is concerned, it's close 148 00:08:03.525 --> 00:08:05.085 to zero, slightly negative. 149 00:08:05.625 --> 00:08:08.565 So I'm going to neglect the delta working capital 150 00:08:08.595 --> 00:08:11.405 requirement in the calculation of the free cash flows 151 00:08:11.405 --> 00:08:13.765 and what is left for the free cash flow calculation, 152 00:08:14.385 --> 00:08:15.645 the net operating profit 153 00:08:15.695 --> 00:08:19.325 after tax EBIT multiplied by one minus tax rate 154 00:08:19.785 --> 00:08:23.085 and a weighted average cost of capital, I need an estimation 155 00:08:23.085 --> 00:08:24.485 for these three parameters. 156 00:08:26.015 --> 00:08:28.445 Let's evaluate the parameters for the free cash flow 157 00:08:28.825 --> 00:08:30.925 and discounted free cash flow calculations. 158 00:08:31.585 --> 00:08:36.085 The operating profit in 23 EBA, the earnings 159 00:08:36.085 --> 00:08:37.365 before interest taxes 160 00:08:37.425 --> 00:08:40.165 and amortization of intangible assets, 161 00:08:40.165 --> 00:08:42.445 which is a traditional way to look at the operating profit. 162 00:08:42.985 --> 00:08:46.125 For this kind of business, it was $1.6 billion. 163 00:08:46.315 --> 00:08:48.925 It's supposed to be less in 2024, 164 00:08:49.345 --> 00:08:51.525 but for the first nine months of 2024, 165 00:08:51.635 --> 00:08:53.765 it's only 0.7 billion. 166 00:08:54.585 --> 00:08:56.845 Now the market assumptions, the professionals, 167 00:08:56.945 --> 00:08:58.245 the experts in the business, 168 00:08:58.365 --> 00:09:02.845 I say I should be about $1.4 billion for 2024. 169 00:09:02.845 --> 00:09:06.165 Maybe the fourth quarter is going to be quite positive. 170 00:09:06.505 --> 00:09:08.685 Is it an optimistic assumption? I don't know. 171 00:09:08.785 --> 00:09:10.405 I'm going to take this figures. Granted. 172 00:09:11.315 --> 00:09:15.645 Corporate tax rate history call future about 20%. 173 00:09:16.425 --> 00:09:19.405 Now the way that average cost of capital is share of equity, 174 00:09:19.815 --> 00:09:22.725 share of debt, respective limited applied by cost 175 00:09:22.725 --> 00:09:24.405 of equity and cost of debt. 176 00:09:24.795 --> 00:09:28.565 Cost of debt is about the interest rate, 6% less taxes 177 00:09:29.105 --> 00:09:33.805 and cost of equity is cap pen, government bond rate 4.5%, 178 00:09:34.145 --> 00:09:37.845 but the beta, which is supposed about one multiplied 179 00:09:37.845 --> 00:09:39.845 by the equity market risk premium 180 00:09:40.185 --> 00:09:43.925 of 6% though work is about 10%. 181 00:09:45.515 --> 00:09:47.365 Once you have calculated the free cash flow 182 00:09:47.385 --> 00:09:50.365 and the weighted average cost of capital, if you want 183 00:09:50.565 --> 00:09:52.165 to use the terminal value formula 184 00:09:52.385 --> 00:09:56.085 to estimate the enterprise value, you need less parameter 185 00:09:56.395 --> 00:09:57.965 what will be the growth rate, 186 00:09:58.195 --> 00:10:01.125 average growth rate in the long term for the free cash flow. 187 00:10:01.785 --> 00:10:03.325 And I take 0%. 188 00:10:03.645 --> 00:10:05.405 I will explain you why in a minute, 189 00:10:05.825 --> 00:10:09.245 but the enterprise value coming from the formula is 190 00:10:09.245 --> 00:10:10.645 $11.2 billion. 191 00:10:11.465 --> 00:10:13.925 Now you subtract the net financial debt, 192 00:10:13.925 --> 00:10:16.805 you get a value effect intrinsic fundamental value 193 00:10:16.905 --> 00:10:18.485 of about $10 billion. 194 00:10:19.185 --> 00:10:21.445 The current market capitalization 195 00:10:21.585 --> 00:10:26.205 of the company is $10.2 billion, though gross 196 00:10:26.585 --> 00:10:30.445 of 0% is definitely what is currently in the mind 197 00:10:30.445 --> 00:10:34.925 of the investors, and that's not really a surprise. 198 00:10:34.955 --> 00:10:37.405 When you observe the evolution of the revenues 199 00:10:37.405 --> 00:10:41.845 of the big four over the last 10 years, you compare 2013 200 00:10:42.105 --> 00:10:45.565 and 2023 Omnicom in billion dollars, 201 00:10:46.155 --> 00:10:50.685 15.3 becoming 14.7 gross is 202 00:10:51.225 --> 00:10:52.725 nil in nominal terms. 203 00:10:53.275 --> 00:10:54.605 What about Interpublic? 204 00:10:54.665 --> 00:10:59.405 It was 7.1 billion in 20 13, 10 0.9 in 205 00:10:59.405 --> 00:11:02.805 2023, but quite the same in 2024. 206 00:11:03.345 --> 00:11:07.005 So there is kind of stabilization as far 207 00:11:07.005 --> 00:11:08.725 as the other two are concerned. 208 00:11:08.725 --> 00:11:13.125 It's WPP in the UK from 11 billion in 20 209 00:11:13.885 --> 00:11:18.245 13 billion of ster pounds of course to 14.9. 210 00:11:18.265 --> 00:11:19.845 So there is a kind of growth. 211 00:11:20.345 --> 00:11:22.645 The winner is publishes the French company, 212 00:11:23.255 --> 00:11:26.365 7 billion euros in 2013 213 00:11:26.745 --> 00:11:30.445 and 13.1 billion in 2023, 214 00:11:30.945 --> 00:11:34.445 but Publicis is significantly more aggressive in terms 215 00:11:34.465 --> 00:11:36.565 of data, ai, et cetera. 216 00:11:38.425 --> 00:11:41.645 You remember I told you that growth was not quantified, 217 00:11:42.145 --> 00:11:43.965 but the synergies are quantified 218 00:11:43.965 --> 00:11:47.045 and they're supposed to provide annual cost savings 219 00:11:47.225 --> 00:11:51.885 of $750 million significantly achievable 220 00:11:51.985 --> 00:11:54.045 within the next two years. 221 00:11:55.075 --> 00:11:57.085 It's detailed. It's about cost on CapEx, 222 00:11:57.255 --> 00:12:00.605 optimizing the organization, cost of services, 223 00:12:01.365 --> 00:12:04.205 GNA platform investment and so on and so forth. 224 00:12:04.625 --> 00:12:08.245 So you have a figure for this kind of synergy, no figure 225 00:12:08.425 --> 00:12:10.805 for growth, but a figure for cost savings. 226 00:12:12.575 --> 00:12:14.485 Evaluating those synergies in terms 227 00:12:14.485 --> 00:12:17.885 of value creation is simply starting the same calculation, 228 00:12:17.905 --> 00:12:20.245 but including the synergies in the calculation 229 00:12:20.245 --> 00:12:21.245 of the operating profit. 230 00:12:22.025 --> 00:12:26.405 The beta was 1.4, you add 0.7, you get 2.1 billion, 231 00:12:27.065 --> 00:12:29.565 you take the same growth rate 0%, 232 00:12:29.785 --> 00:12:31.725 and the same kind of calculation leads 233 00:12:31.745 --> 00:12:35.165 to an enterprise value, which is now $16.8 billion 234 00:12:35.895 --> 00:12:37.765 minus net interest bearing debt. 235 00:12:38.025 --> 00:12:42.645 The fundamental value of equity is $15.4 billion. 236 00:12:43.105 --> 00:12:45.525 You compare that with the current market capitalization 237 00:12:45.585 --> 00:12:47.805 of $10.2 billion 238 00:12:48.345 --> 00:12:52.045 and you get a kind of potential value creation of $5 billion 239 00:12:52.785 --> 00:12:57.245 if you remember that the Omnicom shareholders still have 60% 240 00:12:57.245 --> 00:12:59.365 of the shares after the combination. 241 00:12:59.975 --> 00:13:03.765 $3 billion are attributable to the Omnicom shareholders. 242 00:13:05.425 --> 00:13:07.645 And another way to look at value creation is 243 00:13:07.645 --> 00:13:09.005 to calculate the return investment 244 00:13:09.145 --> 00:13:11.485 for the Omnicom shareholders, assuming 245 00:13:11.555 --> 00:13:14.445 that the synergies are going to be properly implemented. 246 00:13:15.135 --> 00:13:18.285 Again, EBIT a plus synergies is 2.1 billion 247 00:13:18.975 --> 00:13:21.565 after tax, $1.7 billion. 248 00:13:22.145 --> 00:13:23.565 The price which is paid 249 00:13:24.155 --> 00:13:28.965 with the current stock price is $12 billion on price value. 250 00:13:29.345 --> 00:13:32.165 Now, the return investment is uh, the ebit a 251 00:13:32.165 --> 00:13:36.445 after tax 1.7 divided by 12, it's 14% after tax. 252 00:13:36.915 --> 00:13:39.085 Then you compare that with a weighted average cost 253 00:13:39.085 --> 00:13:40.245 of capital of 10%, 254 00:13:40.585 --> 00:13:42.885 and you understand that it's a performing investment 255 00:13:42.885 --> 00:13:45.885 because the return investment exceeds the cost 256 00:13:45.885 --> 00:13:47.365 of capital by 4%. 257 00:13:47.625 --> 00:13:50.205 It is the economic profit of the investment, 258 00:13:50.215 --> 00:13:51.805 which is strictly positive. 259 00:13:53.385 --> 00:13:55.725 Now, clearly as investors don't buy this story, 260 00:13:56.315 --> 00:13:58.605 it's interesting to observe over the last six months 261 00:13:58.605 --> 00:14:01.445 evolution of stock price of IPG on one hand, 262 00:14:02.045 --> 00:14:05.485 OmniComm on the other hand, so there's a kind of correlation 263 00:14:05.485 --> 00:14:08.805 between the two stock prices up to September last year. 264 00:14:09.435 --> 00:14:12.885 Then de correlation, IPG goes down and down 265 00:14:12.945 --> 00:14:14.405 and then is going to go up. 266 00:14:14.545 --> 00:14:17.045 And since the announcement of the combination, 267 00:14:17.385 --> 00:14:22.205 the stock price of IPG is now 0.344 times the 268 00:14:22.205 --> 00:14:23.565 stock price of Omnicom. 269 00:14:24.395 --> 00:14:27.125 Omnicom went up with a high at the beginning 270 00:14:27.125 --> 00:14:28.925 of December, 2024. 271 00:14:29.475 --> 00:14:31.405 Then the consequence of the announcement is 272 00:14:31.405 --> 00:14:34.245 that the stock price is down by almost 10% 273 00:14:34.945 --> 00:14:36.805 and then it's going to be further down 274 00:14:37.315 --> 00:14:39.645 even though it's a little bit up to date as opposed 275 00:14:39.885 --> 00:14:42.125 to the very low in January. 276 00:14:42.985 --> 00:14:45.245 You understand that the announcement 277 00:14:45.265 --> 00:14:48.845 of the combination is destroying 2020 1% 278 00:14:48.945 --> 00:14:50.765 of the Omnicom stock price. 279 00:14:51.385 --> 00:14:52.405 Though again, 280 00:14:52.505 --> 00:14:55.645 the investors don't buy the synergies and the combination. 281 00:14:57.425 --> 00:15:00.165 The fact that the combination is not very much approved 282 00:15:00.265 --> 00:15:03.045 by investors can be found in different 283 00:15:03.155 --> 00:15:04.645 operational considerations. 284 00:15:05.225 --> 00:15:06.685 Of course, there are some good news. 285 00:15:07.145 --> 00:15:09.245 The good news are complementarity. 286 00:15:10.035 --> 00:15:13.445 Omnicom is a strong company in terms of creation, 287 00:15:13.745 --> 00:15:16.725 global presence, very significant buying power. 288 00:15:17.765 --> 00:15:22.045 IPG is very good in data, digital technologies and ai, 289 00:15:22.505 --> 00:15:24.605 and the company has reputation of being quite good 290 00:15:24.605 --> 00:15:27.525 and aggressive at identifying targets 291 00:15:27.825 --> 00:15:29.925 and implementing external growth. 292 00:15:30.785 --> 00:15:33.005 The downside is the management challenge. 293 00:15:33.475 --> 00:15:35.605 They will have to manage a cultural integration, 294 00:15:35.605 --> 00:15:37.885 which is always extremely difficult in this kind 295 00:15:37.885 --> 00:15:41.125 of business, and there will be certainly conflicts 296 00:15:41.225 --> 00:15:43.325 of interest and loss of clients. 297 00:15:43.955 --> 00:15:45.325 There's nothing new about that. 298 00:15:45.475 --> 00:15:48.445 It's the same for audit firms, law firms, 299 00:15:48.455 --> 00:15:51.445 investment banking institutions, and so on and so forth. 300 00:15:51.745 --> 00:15:52.805 You lose clients 301 00:15:52.875 --> 00:15:56.365 because you can't serve competitors under the same roof. 302 00:15:58.505 --> 00:16:01.765 But beyond simply operational considerations, they are 303 00:16:02.405 --> 00:16:03.485 strategic considerations. 304 00:16:04.305 --> 00:16:08.765 The global market is estimated at $1 trillion 305 00:16:09.705 --> 00:16:10.765 in 2024. 306 00:16:11.145 --> 00:16:14.285 The source is WPP, which is a very credible source. 307 00:16:15.025 --> 00:16:19.365 The market was uh, by 9.5%, probably a bit of slowdown, 308 00:16:19.365 --> 00:16:22.965 20, 25 plus 7.7%, 309 00:16:23.585 --> 00:16:25.485 but there is not an elephant in the room. 310 00:16:25.485 --> 00:16:27.725 There are five elephants in the room, 311 00:16:28.225 --> 00:16:31.925 and a strategic challenge for the company is named Alphabet. 312 00:16:32.065 --> 00:16:35.565 Google with revenues in advertising 313 00:16:35.565 --> 00:16:37.725 of $265 billion. 314 00:16:37.795 --> 00:16:42.765 Meta $165 billion plus TikTok, 315 00:16:42.975 --> 00:16:45.445 Biden, Amazon, Alibaba. 316 00:16:46.035 --> 00:16:49.445 This Big five represent more than 50% of the total market 317 00:16:49.705 --> 00:16:52.205 and most of the growth, most 318 00:16:52.205 --> 00:16:55.685 of the growth will be in data, AI and digital. 319 00:16:56.395 --> 00:16:57.885 What about traditional media? 320 00:16:58.315 --> 00:17:01.005 It's quite stable slide, decrease 321 00:17:01.115 --> 00:17:03.365 with a small exception about tv, 322 00:17:03.855 --> 00:17:07.045 which is supposedly growing at about 2%, 323 00:17:07.135 --> 00:17:11.405 which is absolutely not the gross rate of digital and ai. 324 00:17:13.505 --> 00:17:14.805 Let me propose you a few comments 325 00:17:14.865 --> 00:17:16.445 before we close this with cast. 326 00:17:17.135 --> 00:17:21.325 First. Clearly the battle will be on data, on ai, 327 00:17:21.865 --> 00:17:24.685 an this is going to require a lot of investment. 328 00:17:24.985 --> 00:17:26.165 You remember that investment 329 00:17:26.625 --> 00:17:29.365 and growth, it's quite the same, yes, 330 00:17:29.465 --> 00:17:31.085 but what about organic growth? 331 00:17:31.385 --> 00:17:34.005 And then there's a very strong question mark. 332 00:17:34.665 --> 00:17:37.165 Of course, there will be external growth, m 333 00:17:37.165 --> 00:17:40.205 and a targeting, high growth segments, 334 00:17:40.685 --> 00:17:42.725 identifying the companies, implementing the merge, 335 00:17:42.945 --> 00:17:45.245 and it's definitely a strong contribution 336 00:17:45.385 --> 00:17:47.565 of IPG for Omnicom. 337 00:17:48.425 --> 00:17:51.285 But when I look at the presentation of the operation, 338 00:17:51.405 --> 00:17:55.685 I find it extremely financial and not so much business 339 00:17:55.945 --> 00:17:58.125 and growth and development oriented. 340 00:17:58.545 --> 00:18:01.565 We talk about free cash flows, buybacks, dividend, 341 00:18:01.585 --> 00:18:02.925 the confirmation of the tiffan, 342 00:18:03.105 --> 00:18:05.605 and all these figures are quantified. 343 00:18:06.305 --> 00:18:09.525 Growth is just hardly mentioned. 344 00:18:11.585 --> 00:18:13.485 Martin Sore, the very well known 345 00:18:13.505 --> 00:18:17.125 and charismatic founder of WPP commented the deal 346 00:18:17.625 --> 00:18:20.925 and he said it's a circling of vegans, which probably refers 347 00:18:20.925 --> 00:18:24.925 to the far west, and he also added this is about two people 348 00:18:25.525 --> 00:18:27.085 huddling and a cold. 349 00:18:27.905 --> 00:18:31.885 It is a little bit arrogant and extremely unpleasant, 350 00:18:32.225 --> 00:18:34.765 but it's probably also a little bit true. 351 00:18:35.415 --> 00:18:36.245 Thank you very much.