7. Risks related to mergers and acquisitions
Description of the risk
The Groupe’s development strategy through acquisitions and minority investments may create risks.
Part of the Groupe’s strategy aims at enriching its range of services around advertising, communication, consulting, data, digital transformation and commerce and at developing its operations in high‑growth markets. In this context, the identification of acquisition targets may prove tricky and the assessment of the risks associated with an acquisition or equity investment may be incorrect. Sellers may also at times fail to disclose certain risks. The changing and unpredictable regulatory frameworks of certain countries and certain local practices constitute another source of acquisition‑related risks. In addition, acquisitions may be concluded on terms that are less favorable than anticipated, and/or the newly acquired companies may either fail to be successfully integrated into Publicis’ existing operations or fail to generate the synergies or other benefits that were expected. Such events could have adverse effects on the Groupe.
A description of the main acquisitions made by the Groupe in 2023 is provided in Section 1.4.1. (See also Note 3 to the consolidated financial statements (Section 6.6) on “Changes to consolidation scope”).
Goodwill and intangible assets (trademarks, client relationships) recorded on the Groupe’s balance sheet for acquired companies may be subject to impairment.
Large sums have been recognized on the Groupe’s balance sheet at December 31, 2023 for goodwill (for an amount of euro 12,422 million) and for intangible assets (for an amount of euro 958 million). Given the nature of its business, the Groupe’s most important assets are, generally, intangible, and are recorded as such. The assumptions made to estimate the forecasted earnings and cash flows during these revaluations may not be confirmed by subsequent actual results. If the Groupe were to record any impairments, the accounting loss could adversely affect the Groupe’s results and financial position.
Risk management
Before any proposed acquisition, the Groupe carries out due diligence addressing different dimensions (financial, legal, tax, human resources, technology, compliance and ethics, etc.). The M&A teams rely on external advisors for certain due diligence.
Acquisitions are then the subject of an integration plan prepared with the operational managers concerned and drawing on the expertise of the shared service centers.
Each year, the Groupe carries out an assessment of goodwill and intangible assets to determine whether they should be impaired. Analysis of goodwill and intangible assets recorded on the Groupe’s balance sheet is detailed in Notes 12 and 13 to the consolidated financial statements (Section 6.6).
8. Risk of non‑adaptation to customer needs
Description of the risk
Changes to regulations and market practices on the management of personal data may disrupt the advertising industry, in particular in terms of data processing and analysis. The development of programmatic digital media buying, the possible internalization of some activities, as well as the expansion of the Internet giants, could lead to the capture of the Groupe’s activities by other players. Finally, the disruption to some of the Groupe’s major clients impacts their needs and therefore the services that the Groupe provides to them. In addition, the integration of social representations, inclusiveness and environmental issues present certain challenges both for meeting the needs of clients and for the Groupe. The strengthening of artificial intelligence in offers and services poses new challenges both in terms of the composition of the offer and in terms of competition. Should the Groupe fail to deliver the highest quality of service to its clients within acceptable time frames and at scale, it could have adverse effects on its financial position and results.
Risk management
Satisfying the Groupe’s clients and anticipating their needs are the driving forces behind the Groupe's economic and social development. All stakeholders in the supply chain are selected in accordance with the Groupe’s values and strive to meet client expectations. In order to adapt, anticipate and meet client needs, the Groupe has put 1st party data at the heart of the Marketing Transformation offer. Moreover, Epsilon and Publicis Media are connected in a unique way to support clients in their transformation. In addition, the Groupe has focused its strategy on artificial intelligence to become the first “Intelligent System” in the sector to better support clients. Publicis plans to invest euro 300 million in this strategy over the next three years.