Omnicom is set to make further job cuts as it has doubled its target for annual cost synergies to US$1.5 billion, including $1 billion from reducing staffing costs, following last year’s Interpublic acquisition.
The US agency group said it plans to save $1 billion a year on what it called “labour costs” by 2028. These savings are expected to involve a mix of job reductions, relocating more roles to lower-cost locations by “off-shoring” and “near-shoring”, and outsourcing some other jobs to third parties.
There will be $645 million of “labour-related” synergies in 2026 alone and the savings will rise to $920 million by 2027 and $1 billion by 2028, a slide in its Q4 results presentation showed.
The increased savings target suggests Omnicom is likely to axe and relocate a significant number of jobs, in addition to the 4000 redundancies that were announced in a big restructure at the start of December, immediately after the IPG acquisition completed.
An Omnicom spokesperson declined to comment when asked about the scale or nature of any potential further job losses.
Omnicom said it will also save $240 million because of “real estate consolidation” and $260 million from IT, procurement and other operational savings.
Omnicom’s share price leapt more than 15% to close above $80 on news of the bigger-than-expected savings and a separate move to buy back $5 billion of stock.
The $1.5 billion in efficiencies is double the “initial estimate” of $750 million that Omnicom announced when it first revealed it was buying IPG at the end of 2024.
John Wren, the chief executive of Omnicom, said he wants to make $900 million of the total synergies by the end of 2026 and wants the full amount to have taken effect within 30 months — by the middle of 2028.
Wren and Phil Angelastro, the chief financial officer, cited a number of areas where Omnicom is looking to reduce staffing costs at the Q4 results.
One of their first moves has been “the elimination of duplicative corporate network and operational functions” after moving from two holding companies to one. “Unfortunately, we had to make some difficult decisions because you couldn't keep two of everything,” Angelastro said, referring to executive roles.
Omnicom has also been “streamlining our regional, country and brand structure”, which included the axing of DDB, FCB and MullenLowe, and reorganising around nine practice areas, known as Connected Capabilities, such as Omnicom Advertising and Omnicom Media. That has also involved eliminating some “duplicate roles”, Angelastro said.
Other initiatives include “optimising utilisation by shifting to a more unified resourcing model, including accelerating outsourcing and offshoring” of back office functions. Omnicom has offshore hubs in Colombia, Costa Rica and India.
The rise of artificial intelligence has not been a “primary driver” when deciding where to cut staffing, according to Angelastro, although the company is looking at AI and automation to drive savings across the business.
Angelastro said Omnicom had identified many of the areas for potential savings when it was “going into the deal” — “but, really, we didn't have a lot of data to do the due diligence”. The agency group is now “accelerating those efforts” after closing the acquisition.
Analysts at Bank of America welcomed the doubling of cost synergies to $1.5 billion and the $5 billion share buyback as “key positives”, although it said Omnicom’s plan not to give organic revenue growth figures for 2026, because of the difficulty of comparing numbers with the two companies from last year, was a “negative”.
Tim Nollen, analyst at Sector & Sovereign Research, said: “We like the story [for investors] here, recognising the importance of a scaled yet lean and versatile operation to take advantage of the opportunities AI brings, and to fend off competition.”
Omnicom previously said in December that it expected total headcount to be around 105,000 compared to 128,000 for both Omnicom and IPG at the end of 2024. Redundancies were not the only factor as the company will cut the payroll by 10,000 by selling and exiting non-core agency assets. On that basis, some analysts predicted Omnicom could axe up to 3000 additional jobs in 2026 and 2027, although the company dismissed that as “speculation and inaccurate” at the time.
The New York-based group posted an annual net loss of $54.5 million on revenue of $17.3 billion, which included one month following the IPG acquisition. One-off costs included $347 million of “IPG acquisition-related” costs, $1.2 billion of “repositioning” costs such as redundancies and a $547 million loss on planned agency sales and other “dispositions”.
Omnicom’s 15% share price rise meant the stock has recovered all of the ground that it lost at the start of February when fears about the impact of AI led to a widespread sell-off across the agency sector and beyond.
Omnicom plans an investor day on 12 March. The new shape of the group means media, including precision marketing, generates more than 50% of revenues and advertising creative less than 20%, Wren and Angelastro said on the earnings call. The remainder comes chiefly from healthcare, public relations, experiential and branding.
Source: Campaign UK
