Deals and IPOs

Omnicom, Publicis deal was driven by ego: WPP

WPP: Ego fueled the Omnicom-Publicis merger

A deal that would have created the world's largest advertising agency was driven by ego and emotion, British advertising firm WPP told CNBC following the collapse of a $35 billion planned merger between rivals Omnicom and Publicis.

U.S.-based Omnicom and France's Publicis said in a statement late Thursday that they have called off merger talks due to challenges that were insurmountable. In late April, Omnicom CEO John Wren expressed doubts about the deal, citing tax complications.

Read MoreOmnicom, Publicis call off proposed $35 billion merger

"There were big tax issues we were told and also a lot of what is called social issues," said WPP boss Martin Sorrell, speaking to CNBC from China – WPP's third largest market. "It was turning into a bit of a soap opera because both companies in their Q1 statements were saying they were good on their own."

"I think this deal was driven by ego issues and emotional issues, I think both CEOs wanted to try and dislodge WPP from its number one perch and so it was emotional and egotistical. It was also a case of eyes being bigger than your tummy," he added.

Maurice Levy, chief executive officer of Publicis Groupe SA, left, and John Wren, chief executive officer of Omnicom Group.
Balint Porneczi | Bloomberg | Getty Images

According to Sorrell, regulatory authorities in China had also been having a close look at the proposed tie-up between Publicis and Omnicom.

The merger had called for a 50-50 ownership split of the equity in the new company, Publicis Omnicom Group, with Wren and Publicis CEO Maurice Levy serving as co-CEOs for 30 months. Announced last July, the deal had been presented as a merger of equals.

The deal's collapse comes amid a flurry of sizeable merger and acquisition activity around the world early in 2014. Recent deals for instance include a $50 billion tie-up between Lafarge and Holcim to create the world's biggest cement maker.

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"Interestingly, if you look at the Lafarge-Holcim deal, which was also described as a merger of equals, that was a meticulously planned deal. They sorted out all the positions, chairman, CEO before they made the announcement," said Sorrell.

"At the end of the day, both [Omnicom and Publicis] CEOs said they met in closed rooms without anybody else before the announcements and didn't use expensive advisers," he added, giving reasons for why the deal may have failed.

Read MorePublicis CEO: No 'embarrassing questions' on merger

Sorrell said the collapsed merger talks did not put WPP off pursuing acquisitions.

"It doesn't put me off from continuing on our course which is small and medium-sized deals in fast growth markets, Sorrell said.

"It's a sorry saga but both companies are good companies and as they said themselves, they're equally better off apart as they were going to be together," he added.