WPP finally sealed a £3.1bn merger with the US advertising group Young & Rubicam yesterday, after three months of negotiations dragged out by a series of acrimonious walk-outs.
The deal creates the world's largest media buying agency, with leading positions in public relations, direct marketing and market research. WPP's chief executive Sir Martin Sorrell, who will run the combined organisation, said: "This is a combination for the 21st century."
However, Young & Rubicam's chief executive Thomas Bell will not be staying to see it through.
He becomes chairman of Young & Rubicam within WPP but he revealed he would be leaving "at an appropriate time in the future", explaining: "Two cooks spoil the broth."
Insiders said Mr Bell had turned down a job as chairman of the combined company. He was one of the main opponents of a merger, only agreeing to proceed after concerted pressure from boardroom colleagues.
Under the terms of the tie-up, WPP will buy Young & Rubicam for £2.4bn in an all-paper transaction. Young & Rubicam's investors will get 4.175 WPP shares for each share they own.
The two groups said that they needed size to cater for the needs of multinational clients - among the top accounts they hold between them are several transnational corporations such as Ford, IBM and American Express.
WPP owns the advertising agency Ogilvy & Mather, while Young & Rubicam owns J Walter Thompson. Mr Bell admitted negotiations had been tough: "We'd part for a while and always come back and do one more dance.
"We both knew that if we kept at it, there would be a meeting of minds."
Among the sticking points was the thorny issue of "golden parachute" allowances, which entitled the US company's executives to payoffs of up to $60m in the event of a change in control. These have been dropped, in exchange for employment contracts within the combined group.
Talks broke down again last month, when Young & Rubicam tried to insert a clause giving it autonomy for a year following the merger. However, eventually this demand was also dropped. Sir Martin said: "There was compromise on both sides."
The two companies said the tie-up would yield annual cost savings of £20m by the end of next year. However, WPP's shares fell 42p to 803p, reflecting the potential dilution caused by the deal.
David Forster, an analyst at Salomon Smith Barney, said: "More and more clients do require agencies capable of servicing their needs internationally. I think we'll see further deals like this."
