Management

Leila Abboud is a Bloomberg Gadfly columnist covering technology. She previously worked for Reuters and the Wall Street Journal.

Chapeau, monsieur.

After almost 30 years as head of France's Publicis Groupe SA, Maurice Levy announced Thursday that he will hand the reins on June 1 to Arthur Sadoun, a 45-year-old executive with a background in the creative side of the business.

It's hard to overstate Levy's achievements: His charisma and humor made him a fixture on Madison Avenue and his network of corporate titans ran deep. He took over from founder Marcel Bleustein-Blanchet in 1987 and turned the family-run company into the world's third-biggest advertising agency. Sales grew almost 25 times to 9.6 billion euro ($10.3 billion) while the group's market value has increased a hundredfold to more than 14.6 billion euro. The firm employs about 80,000 people.

Levy's main mistake -- and it's a big one from which Publicis still hasn't fully recovered -- was trying to engineer an ultimately unsuccessful merger with U.S. peer Omnicom Group Inc. in 2014. A tie up would have given Publicis heft, as well as helped solve the thorny issue of Levy's successor. Instead, it left Levy chastened and Publicis in disarray, resulting in the loss of major contracts the following year.

The 74-year-old would have been fired at many companies. That he wasn't came down to Publicis's familial culture. Bleustein-Blanchet's daughter, Elisabeth Badinter, a well known academic and feminist author in France, stuck by him, and that loyalty ran both ways. Levy once ran into a burning building to save company records.

But a new face at the helm doesn't mean the job of rebuilding and restructuring Publicis is finished, far from it.

Way to Go Yet
Publicis has trailed its peers in terms of organic revenue growth since the failed Omnicom deal
Source: Bloomberg Intelligence

Sadoun needs to stop losing market share to the likes of WPP Plc, and Omnicom. That'll be made harder by the many changes afoot in advertising as spending shifts from traditional media to the internet. Wooing clients over martini-soaked lunches has gone the way of the dodo; now, it's all about Facebook and data analytics.

Still, the business is starting to recover. Revenue and earnings before interest, tax, depreciation and amortization are expected to pick up from 2015 lows while free cash flow, forecast to have bottomed at 908 million euro in 2016, is tipped to touch 1.23 billion euro in 2018.

Lingering Pain
Stock in Publicis trails rivals
Source: Bloomberg

There has also been an encouraging series of contract wins for Kellogg Co. and HSBC Holdings Plc, along with media buying from KFC Ltd. and Fiat Chrysler Automobiles NV. A large contract with Sprint Corp. is at risk amid a review, however. Whether the group's organizational overhaul, undertaken last year to improve client service, is working, or Publicis is just cutting prices to win share remains to be seen.

Levy, who pending shareholder approval will become chairman of the Publicis supervisory board, will need to give Sadoun the space to make his own mark. Investors should also hope Badinter pushes the septuagenarian gently in the right direction.

There will be time later to debate what Sadoun should do during his tenure. For now, let's just pause to commend the old lion.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Leila Abboud in Paris at labboud@bloomberg.net

To contact the editor responsible for this story:
Katrina Nicholas at knicholas2@bloomberg.net