Ketchum, a leading global public relations unit of Omnicom Group Inc. (OMC), has finally integrated with the German subsidiary of Pleon, Europe’s largest strategic communications consultancy, located in Munich.
 
With the German integration, the merger is finally completed, which began in June 2009 with the intention to create one of the largest and most diversified communications consultancies in the world and clients are also expected to benefit from the merger.
 
Typically, Omnicom’s strategy revolves around acquiring complementary companies with strong entrepreneurial management teams to expand its client base. During fiscal 2009, Omnicom acquired 4 subsidiaries and increased its stake in various existing ones. The increased integration process would enhance its client base, which is its key growth strategy as Omnicom’s business revolves around its clients. Current improving economic conditions should also benefit Omnicom as they help increase clients’ spending.
 
However, this huge dependence on clients is risky as the loss of a client or reduction in client spending would adversely affect the company’s results. An intensely competitive advertising environment and pricing pressures remain causes of concern.
 
Omnicom’s direct competitors are Interpublic Group of Companies Inc. (IPG) and WPP Group plc (WPPGY). However, management remains committed to expand its business and relationships in Asia , where operating conditions remain extremely favorable. This should improve the long-term profitability of the company.
 
Markets are picking up and the improving economic conditions should benefit Omnicom as they help to increase consumer spending. We continue to rate the stock as Neutral in the long term. The stock’s short-term rating also remains Hold with a Zacks #3 Rank.
 
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