Publicis and Omnicom plan to merge to create the world's biggest advertising group, worth $35.1 billion.
The tie-up could spur rivals to do deals to keep pace with big changes from technology and the Internet.
The companies said yesterday the deal - presented as a merger of equals - would bring the necessary scale and investment firepower to cope with rapid changes wrought by technology on the advertising business.
"This is a new company for a new world," Publicis chief executive Maurice Levy said.
"It will be able to face the exponential development of new internet giants like Facebook and Google, changing consumer behaviour, the explosion of big data, as well as handle the blurring of roles of all the players in the market,'' he added.
The transaction marks a return of big M&A among the world's 'Big Six' advertising groups, which have spent the past few years buying up much smaller targets in emerging markets and among web marketing specialists.
Other deals might now follow. Current leader WPP could make a move for US-based Interpublic, France's Havas or Japan's Dentsu.
The new company - Publicis Omnicom - will be traded in New York and Paris. It will overtake WPP and have combined sales of nearly $23 billion and 130,000 employees. It brings together Publicis brands such as Saatchi & Saatchi and Leo Burnett with Omnicom's BBDO Worldwide and DDB Worldwide.
The French and US company said shareholders in Publicis and Omnicom would each hold about 50% of the new company's equity.
Omnicom chief executive John Wren and Publicis CEO Levy will jointly lead the new company for the first 30 months, then which Levy will become non-executive chairman and Wren CEO.
The two veteran CEOs chose the neutral territory of the Netherlands for the new holding company.
