Missed Merger Opportunity?

Last November, Publicis Chairman and Chief Executive Maurice Lévy, announced a merger to create an “unmatched leader”. This combination of two agencies was orchestrated to “serve clients that are transforming into digitally-driven businesses in a marketplace that is undergoing a rapid pace of change”. Levy was heralding the union of SapientNitro and Razorfish.

Both are veterans of the digital wars. They have lived through the dotcom bust, the advent and expansion of social media, and were independently trying to define what digital means to business before being combined. Undeniably they had two of the coolest names in the business.

Lévy noted at the time of the merger, “When we formed Publicis.Sapient we integrated the strongest set of capabilities in digital, consulting and technology amongst any of our peer group. We are now taking this next, important step, to further integrate these formidable assets. SapientRazorfish is a powerful new entity in the marketplace uniquely combining customer experience strategy, omni channel commerce, and technology deployment to create a new breed of digital transformation partner pointed at today’s most critical client need – reshaping their businesses for the future.”

That is a lot of industry jargon but you get the gist. What I took away from it is Publicis had no real merger or integration plan. They just hoped the merged management groups would create some magic. Along the way I am sure they hoped for cost savings by paring down staff and real estate.

Fast-forward four months and Publicis reported it would write down its digital arm, Publicis.Sapient, that houses SapientNitro, by roughly $1.5 billion or almost half of its initial valuation. Analysts and media saw this happening for a few different reasons. Some pointed to spending too much on Sapient (Publicis paid $3.7 billion in 2014}. Others suggest it has become a drag on Publicis’ overall business. While still another contingent believe the merger with Razorfish is to blame.

Needless to say this looks bad. After all, SapientNitro’s job is to ‘reshape client businesses for the future’. Yet, I am confident that they will pull it together through a deep recalibration of their own business. This has to start with what they mean by “a new breed of digital transformation partner”. The entire digital marketing space is churning this way and that and is become more and more vague. Digital agencies are having an extremely hard time articulating their differences and benefits.

What surprised me most about the SapientNitro and Razorfish merger was both the substance of the combination and how it was packaged. They missed an amazing opportunity to redefine the category or claim entirely new space.

Equally unfortunate is the branding. From a naming perspective it was pretty uninspired resulting in SapientRazorfish. Both had equity but the combined name fails to communicate to clients anything new and exciting. Logos are highly subjective but surely they could have done better that just putting the two together on a shared canvass. Four months after the combination and the two agencies are still running their own sites. There is no SapientRazorfish website (that should have launched on the day of the merger announcement).

The best thing the new entity can do for itself is make this merger a case study. It has to treat itself as a client. They have to give themselves a tough, tight brief and get to work. Yet, there is a big variable … can the consultant heal thyself? It will be extremely interesting to watch. I am sure clients and prospective clients are watching closely.

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