BofA turns cautious on Omnicom, warns IPG deal risks are being underestimated

Bank of America has downgraded Omnicom Group to Underperform, flagging concerns that the market is overlooking structural growth risks tied to the company’s proposed acquisition of Interpublic Group, even as investors focus heavily on cost synergies and shareholder returns.

The brokerage lowered its price target on Omnicom to $77 from $87 and cut earnings estimates for the 2026–2028 period by 7% to 12%, bringing its projections well below current consensus.

According to the bank, the deal’s appeal on paper is clear. Omnicom is acquiring IPG at what it sees as an attractive valuation, with substantial scope to extract costs and deploy savings toward share buybacks. But that narrative, BofA said, masks more fundamental challenges around growth quality, asset health, and capital allocation.

Revenue growth assumptions face reality check

BofA questioned the assumption that the combined entity can sustain more than 3% annual revenue growth in 2026 and 2027, calling such expectations difficult to reconcile with current operating trends across both groups.

The bank also expects a broader reshaping of Omnicom’s business mix than the market currently anticipates. It estimates that up to 15% of pro forma revenue could eventually be put up for sale as part of post-merger streamlining.

However, it warned that buyer appetite may be limited for some of these assets, raising the possibility that portions of the portfolio could be closed or scaled back without generating meaningful value.

Investment needs threaten margin gains

Another pressure point flagged by BofA is the state of IPG’s legacy operations. While margins have improved in recent years, the bank said that expansion has come despite stagnant or falling revenues, indicating that the gains may have been driven by underinvestment rather than operational strength.

It now expects Omnicom to step up spending to stabilise and rebuild growth across those businesses, a shift that would likely dilute profitability in the near term.

Taken together, these concerns led BofA to revise down its growth outlook and valuation framework for Omnicom. The bank said the company should trade at a discount to peers such as Publicis, reflecting its expectation that Omnicom’s revenue growth will trail competitors for the foreseeable future.